Abstract: Based upon economic thought, the history of China since 1949 can be segmented into 3 major phases, from command through transition to market economy. Each witnesses the political wrangling, as in a principal-agent relationship, between the central and local governments, especially with regard to fiscal distribution. A model of information economics is further built for the purpose of enlightening future policy-making, by concluding the optimized management structure such as the centralized, the decentralized or the one in between.