Reforms in China have resulted in a primitive market economy in the last two decades and the autonomy of many large cities has been increased significantly. The old system based on planned economy still prevails in urban economic management although the market economy is playing more and more important role. The organization, structure and role of urban governments have great impact on urban economic development. The organization, structure and role of urban governments have great impact on urban economic development. Thus a municipal government is interested in raising its administrative status, expanding its jurisdiction area and increasing its administrative power because they are the basis for the allocation of the redistributed resources. This paper uses Nanjing as a case study to discuss how adjustment of the administrative areas has re-shaped its spatial economy. After a brief introduction, the paper first discusses the new development strategies of Nanjing and its urban spatial structure. It then examines the restructuring of urban administrative areas, existing problems, new strategies and urban governance in Nanjing focusing on its new development area of Jiangbei. The paper argues that the organization of urban government and restructuring of administrative area should emphasize the construction of the market for production factors to facilitate market competition. An integrated development strategy "two districts as one unit" is proposed to solve remaining administrative problems in Nanjing's Jiangbei area.