This research aims to explore the development of private higher education and related policy changes in China in the light of Foucault's notion of governmentality in neoliberal China. Essentially it is a synthesis of macro-level and micro-level analysis. The researcher examines policy development in combination with wide social, political and cultural backgrounds. Meanwhile a case study is carried out to investigate managers' comments on some policy documents issued at different times, in which the development of the case college is outlined as well. Data is collected through case study and interview, and it is found that central policy documents have undergone an evolution and have affected private higher education to a large extent. Yet universities and colleges are not passively accepting government's decisions, they may make various strategies within the policy permission to survive. Drawing on the conception of governmentality, some insights are provided to explain the broad social, political and cultural contexts underlying policy phenomena. It is argued that the process of policy development is a consequence of the "reform and openness" decision caused by political elites' changing rationalities of governing the state.