Abstract: A series of changes in provincial regional economic disparities have occurred due to adjustment in fiscal rights caused by China’s fiscal decentralization. Under the background of fiscal decentralization, this article analyzes the impact of transfer payment and tax preferences on the scale of primary city through a spatial panel model, using the data of China's 27 provinces from 2000 to 2012. Results show that government transfer payment policy is inefficient for the suppression of the primary city’s growth as well as the balance of regional development. The higher financial dependence on central government is, the larger primary city is, and provincial government’s bias of transfer payments towards peripheral areas cannot prevent primary city’s expansion. In addition, primary city is able to take the advantage of tax preferences policy to further enlarge its scale. On this basis, this paper presents appropriate proposals for fiscal policies and city development.