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The study introduced the concept of Merit Pay Based on Student Achievement into the effect model, and sought to assess the extent to which it moderates the relationship between Instructional Leadership and Teacher Self-efficacy. Survey data were collected from 221 mathematics teachers in junior high schools in Zhengzhou, Henan, in central China. The results showed that the interactions for Instructional Leadership with Merit Pay Based on Student Achievement was significant in predicting Teacher Self-efficacy. This study explored the conceptual framework of the impact of instructional leadership on teacher development in Chinese context, and also clarified what appropriate frequency of teacher incentives can maximize this impact. It was identified that instructional leadership and merit pay have different effects on different teachers.