In the last three decades or so, China has managed to become the second largest economy in the world, especially after engaging in economic reforms since the late 1970s. Despite being a "world factory" and playing a very significant role in manufacturing products and exporting to different parts of the globe, the Chinese government has realized that depending upon this production mode cannot sustain the country's long term economic growth and development. Hence, the Chinese government has tried to invest more in advancing technology, research and innovation, knowledge transfer, and promoting entrepreneurship education. This article sets out to critically examine the major strategies and policies that the Chinese government has adopted in promoting entrepreneurship and innovation against the wider policies outlined above, with a focused reflection given to the major challenges facing Chinese universities during the process of promoting entrepreneurship and innovation, and entrepreneurship education.