This paper attempts to bridge critical institutionalism and fragmented authoritarianism in China. Moving beyond the predictive functionalist perspective and the overemphasis on state primacy, the paper focuses on how top‐down water policies are exercised by local agencies, collective communities, and individuals at the county level and below. Through a case of irrigation management in the upper reaches of the Yellow River, this paper posits that institutional bricolage and fragmentation are prevalent despite the imposition of the authoritarian state. Moreover, it shows that local water policy implementation is reshaped by various contested discourse, the pursuit of different interests, social relations, and broad transformative forces. This high degree of diversity not only manifests an increasing institutional flexibility, as water policies are operated outside China's hierarchical bureaucratic system, but also is embedded in an era of socio‐economic transformation where the processes of industrialization, urbanization, and neo‐liberalization have changed the dynamics of rural governance.