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China faces major challenges from social instability and general societal disaffection, which have continued to grow even as the economy has developed. In recent years, the Chinese government has tried to address such issues by diverting increasing resources to raising the income of villagers and providing social services to the urban and rural population alike. So why have “mass incidents”–public protests that sometimes turn violent–continued unabated? This article argues that the structure of central-local relations leads local governments to discount the interests of residents on the one hand, and distort central policies to the benefit of the local government on the other. The “party manages the cadres” principle, through which the central government exerts vertical control, prevents horizontal and bottom-up accountability, and thus ends up setting the interests of local cadres against those of local residents. The central government's interest in preserving its own power makes it reluctant to reform the central-local relationship, thus perpetuating crises.