Abstract: “North paradox”, from the perspective of institutional process, is, in institution and governance, a dilemma, to resolve which is to exert institutional advantages and enhance governance efficiency. In view of the inherent tension of the state's dual identity of public interest representative and rational “economic man”, the reform of residential land system initiated by the state to promote the maximization of public interests, not only impacts the institutional advantages formed in long-term practice, but also inhibits the exertion of institutional governance efficiency, for the local government, as the state agent, haspursued the maximization of its own interests in rule-making,in forced return of residential land, and in competing interests with the people. The pilot areas have adopted a series of exploration practices such as adjusting the reform objectives, innovating the system design, perfecting the main structure and standardizing the system process, which have significantly improved the whole performance of the system. Besides, with the response of the “Four Governance”, the system with the embodied governance efficiency of keeping farmland, retaining residents and stabilizing society. The key to resolve the dilemma of system and governance caused by the tension of government role, a case study shows, lies in transforming institutional advantages into institutional performance, strengthening institutional governance, and organically integrating institutional performance with governance practice, so as to solve the “North paradox”.

Key words: North Paradox, institutional performance, governance efficiency, reform of residential land, pluralism and co-governance, protection of rights and interests, grass-roots governance