What is distinct about Chinese urban governance? Classic theories predict that when the central state retreats from resource allocation, capacity-strained local governments must form alliances with non-state actors, thereby diluting state power. In China, however, state power remains dominant despite decentralization. Analytically separating the Party from the state reveals that continued predominance of the party-state rests on a threefold configuration: (1) local governments do form alliances, but top-down, campaign-style mobilization through Party institutions can dissolve alliances and discipline bureaucrats; (2) this hierarchy of control ensures that local officials prioritize upward accountability over local alliances; and (3) anticipating the fragility of alliances, local states anticipatorily build capacity to obtain steering power over their local partners. I call this configuration ‘party-state urbanism’ and demonstrate it through a case study of Shenzhen. Initially lacking infrastructural power, the municipal state allied with indigenous villages, tolerated their autonomy and delegated governance duties while gradually expanding capacity by co-opting village institutions. This allowed the municipal state to subordinate the villages at low political cost when Xi Jinping’s anti-corruption campaign turned bureaucrats against villages. I conclude by underscoring the importance of party politics for understanding urban governance in China and beyond.