Unquestionably, the role of higher education institutions (HEIs) in society and economy is engorged. The term higher education proposes an educational level above the secondary education with advanced tools of knowledge which enables the students to generate, distribute, and preserve systematic academic knowledge at colleges, universities, and institutes of technology. This qualitative study is an endeavor to analyze the effect of commercialization policy on the higher education system and socio economic development of the Chinese society. During 1999, marketization and commercialization of education sector remained the sole policy instrument for attaining the objectives of liberalization and modernization of Chinese higher education. The realization that the development and advancement in the field of science and technology was impossible without development of education system, particularly the higher education, forced China to employ different strategies. Chinese government resolved to provide an access to over 15% of its total population to higher education. These initiatives can be divided in five categories i.e. ensuring provision of education, management of HEIs, investment for the growth of higher education, recruitment and job placement for graduates and delivery of autonomy to the universities and HEIs. The commercialization of higher education has converted the whole Chinese education system into class based system while establishing the overwhelming monopoly of private sector as being practised throughout the West and U.S. which has confronted the Chinese with new social problems due to population size, patterns of governance, demography and socio-economic circumstances.