In recent years, project initiatives have become an important administrative vehicle of Chinese state governance. The existing literature reveals that the system has increased the control of higher level authorities over their subordinates, affecting the lower level governments’ capability for overall coordination. To verify this, this study examines a micro-lending program for women in Sichuan province, sponsored by central government. The findings indicate that although the project system provides opportunities for control from top to bottom, it also provides lower-level governments with more bargaining power as counterweights. It is argued that the project system has helped local governments to protect local interests by clarifying the rights and responsibilities in the hierarchy system. This has begun to have far-reaching effects on local governance, as well as the relationship between different levels of government and between the state and society.