This paper investigates the strategic decisions of authoritarian rulers regarding the purging and rehabilitation of elites, exploring how these choices impact regime stability. Central to this inquiry is the dictator's loyalty-competence trade-off, where leaders must balance incorporating competent but potentially threatening elites with retaining loyal yet possibly less capable allies. This study argues that rulers adapt their strategies of purges and rehabilitation based on prevailing circumstances, thereby reshaping elite networks and framing informal institutions. Using the Chinese Communist Party's tumultuous period from 1966 to 1982 as a case study, this research employs measures of individual centrality and factional affiliation to predict elite purges and rehabilitations. The findings reveal that stabilized regimes are more likely to purge competent elites from rival factions, while rehabilitation processes emphasize centrality and competence over factional loyalty. Additionally, the study examines how external shocks and leadership changes influence these strategies, revealing that flexibility in purging strategies and competence-focused rehabilitation can lead to peaceful authoritarian power-sharing, while neglect of factional balance can lead to one-man rule. This research enriches the scholarship on authoritarian regimes by providing an in-depth analysis of the mechanics behind the loyalty-competence trade-off and its implications for regime stability.