The state-university's interaction and relationship has long been a key focus of scholarly discussion. A distinct strategy in China's higher education is policy experimentation (PE), which allows indigenous policy innovations to be generated at local institutions and incorporated into national policymaking. The PE approach allows power negotiation among various stakeholders in creating a strategy space for reform. Through case studies, the paper examines those complicated processes enabled and shaped by stakeholders' perceptions, behaviours and strategic actions. It proposes three types of rationales for using PE as mission-driven, problem-driven and administration-driven. The university uses 'bargaining and persuasion' and 'formation of advocacy coalition' in negotiating with the state whereas the state communicates with the university through 'documentary politics' and 'open method of coordination'. Thus, PE can be regarded as a new way of HE governance in effectively mediating the state authority and university power in building consensus for China's HE development.