Focusing on educational reform in China, this paper suggests policies that will lead to the optimal diffusion of educational innovations so as to enhance China's modernization efforts. The intention is to identify a theory of knowledge about the types of educational policies likely to be most beneficial in helping China achieve its educational modernization objectives. Rogers' (1983) model, used as a framework for describing the phenomena under observation, posits four crucial elements in the diffusion of new ideas: (1) the innovation itself; (2) communication through certain channels; (3) time; and (4) the social system. The paper begins with a survey of educational development in China from before 1949 to the present. The recommendations are based on data collected, first, through the involvement of faculty members of the University of Victoria in cooperative programs with the East China Normal University in Shanghai, and, second, through an open-ended data-gathering questionnaire sent to 30 Chinese scholars who had also studied in Canada. Reviewed by China experts at the East-West Center in Honolulu, the policy recommendations call for (1) continuation of existing exchange programs sponsored by international agencies; (2) an increase in the number of Chinese scholars studying abroad and higher levels of support for Chinese students by western universities; (3) enhancement of the teaching of English as a foreign language, especially for adults; (4) special attention to development of the legal and administrative infrastructure of education in China; and (5) cooperative education programs to establish closer ties between education and industry. Appended are four papers detailing the procedures involved in executing and evaluating the collaborative programs described in the paper. (TE)