The central–local structure is a unique perspective for both China’s constitutional law and party-state structure. However, the conventional approach to this issue pays great attention to its structural framework. This paper takes a unique approach to the functionality of local government guidance funds, an increasingly frequently used method for local governments to implement national projects like Made in China 2025. The project has been one of the several controversies between the United States and China in their ongoing trade confrontation. Built upon an analysis of paradigms in central–local relations, this paper further investigates the rule of law movement at the level of local government, an often ignored and under-discussed aspect of China’s central–local structure. The tentative conclusion is that the use of local government guidance funds facilitates local competition and promotes the rule of law.