As an important supplement to the vertical transfer, the mechanism of pairing assistance with the characteristics of horizontal transfer plays an important role in promoting regional coordinated development. This paper finds that, the pairing assistance takes the “project system” as the operation carrier, correcting the strategic behavior of local governments’ taxation and expenditure, improving the incentives for economic development, optimizing the efficiency of fiscal expenditure, strengthening the constraints on the supply of basic public services, and then promote the coordinated development of the region. The empirical analysis based on the conducting collaboration and paired assistance between the eastern and western regions from 2000 to 2015 shows that pairing assistance not only reduces the regional development gap, but also improves the incentive distortion of vertical transfer payments. The mechanism analysis shows that the pairing assistance can “incentivize aid” by increasing the financial efforts of recipient regions, reducing the probability of zombification of enterprises, and raising the level of basic public service expenditures. The research of this paper provides theoretical and empirical support for planning a new round of fiscal and tax system reform, optimizing the transfer payment structure and improving the transfer payment system.