The spatial spillover effects of prefecture-level cities have impacts on the industrial structure of counties. An assessment of such impacts will have important theoretical and policy implications for deepening the "province governing county" (PGC) reform. This paper reviewed the process and characteristics of PGC reform in Henan Province. Based on an econometric model of county's industrial structure as well as in-depth interviews, the study examined how county empowerment and the spillover effects of prefectural cities affect the industrial structure of counties. Several findings deserve to be highlighted. First, during 2004-2016, the decentralization of economic authority accelerated the growth of the tertiary sector at the county level, whereas the decentralization of social power inhibited the output level for all industries. Secondly, the spillover effects of prefectural cities have opposite impacts on agriculture and non-agricultural industries, and the decentralization of economic authority amplifies the spillover effects. The trickle-down effects on agriculture are more noticeable in less developed counties, whereas the polarization effects on non-agricultural sectors (especially the tertiary sector) are more obvious in economically advanced counties. Thirdly, we argue that the delegation of economic authority could be implemented in a larger number of counties, though cautious steps need to be taken in delegating social management power. In more developed prefecture-level cities, the PGC reform should be conducted in agricultural counties; in less developed cities, by contrast, counties with higher level of industrialization should be chosen for the PGC reform.