China's graduate school education started to expand only after 1993 and presently, the number of its students has already exceeded all other countries, second to the United States. The analysis shows that the development over the past decade has been mainly conducted by the state policies, in combination with some policies for deregulation. Through the latter, the whole system has become more market oriented, Americanized, and internationalized. The continuation of the state planning and strategies for excellence, on the other hand, has succeeded in building up the pyramid structure for the graduate school education. Such high efficiency, however, has been encountering both old and new challenges. In the challenges can be seen the limitation of the state control.