Since 1976 China has entered a new historical period in which the central task is to modernize agriculture, industry, national defense, and science and technology (S&T). The modernization of S&T is the key to the realization of the modernization in the other three fields. China has established a research and development (R&D) system of five component parts. The first part, the Chinese Academy of Sciences (CAS) focuses on research in basic sciences, newly emerging scientific areas and high technology. The second part, research institutions, mainly engage in applied research related to government. The third part, universities and colleges, concentrate on basic and applied sciences. The fourth part, research institutes for the national defense, concentrate on defense technology and the fifth part, provincial research institutes, makes up most of the S&T effort in China and are mainly concerned with applied research for local needs. This paper discusses the governing of China's R&D efforts, reforms of its managing system including funding, commercialization of technological achievements, encouragement of industry, personnel management and strengthening basic research. A strategy for developing science and technology is proposed. Seven priority research areas are identified including bio, space, information, laser, automation, energy and advanced materials technologies. (CW)