There are two important problems about the quality of China’s economic growth. One is the total factor productivity (TFP) growth; the other is the coordination of the development of regional economy. This paper analyzes dynamic mechanism of regional non-cooperation and cooperation with coalitional game. In the following, this paper discusses how to arrange the coordination mechanism of fiscal expenditure to achieve the solution problem of local protection and market segmentation. In the end, this paper suggests using coordination mechanism of fiscal expenditure to promote regional cooperation, the quality of economic growth, the growth of total TFP, and achieve sustainable economic growth.