Decentralization in economic affairs have been put into practice after market based reform,the hierarchies in political institution result in local governments competing with one another for economic resources. Owing to the restrictions of administration and liquidity of resources,the competing does not necessarily lead to economic increase. If local governments select the protectionism strategy or the plunder strategy,the transaction costs may increase,and economic growth may decrease. Appropriate decentralization and improving liquidity is necessary for building competition order.