In the last few decades, the Chinese higher education system has changed considerably from an elitist model to a massified one with public and "minban"/transnational provisions. Accordingly, this study sets out against the context of higher education expansion initiated in late 1998 to critically examine the major trends of non-state (including "minban" and transnational) higher education developments. More specifically, it discusses how "minban" higher education has transformed and why transnational higher education has evolved and become far more popular in China. Against the marketisation and privatisation of education context, this article focuses on reviewing policy change and university governance to diversify higher education provision through the market forces/non-state provision. A critical examination of the changing state-market-education relationship would enable us to appreciate the complex social, economic and political issues that the Chinese government has to tackle, especially when the country confronts the dilemma of adopting a more liberal approach in reform with the fear of excessive external influences to the political regime or a more conservative approach which would limit the country's further development. The present article contributes to a better understanding of the 'education market' formation in China.