At the end of 1998, the Chinese central government decided to raise China's level of participation in higher education dramatically. While the move was influenced by a combination of both domestic and external forces, it was a decision fundamentally based on economic considerations. Using the university enrolment expansion policy as an example, this article interrogates the rationale for and the contexts of this policy-making. It then analyses the measures and consequences of the implementation of this policy to illustrate the changing governance in mainland Chinese universities. (Contains 4 tables and 2 notes.)