Transnational higher education is a rapidly growing phenomenon that is under-researched and often even misunderstood. As the world's most promising market, China has the potential to dwarf all traditional offshore markets. Little research has been done to seriously analyse the fast growth in China. A sound understanding of the Chinese situation facilitates improvement of future provision of higher education by Australian universities, presently the most dominant force in China. This article incorporates Chinese and English literature, reviews the latest Chinese government documents, and delineates a comprehensive picture of transnational education provision in China. It locates the development in a wider social and policy context in China, examines the basic features of Chinese-foreign partnerships, and reveals some major issues of concern. It argues that China needs to form effective regulatory frameworks to govern this new development in higher education, especially in terms of quality assurance to ensure cultural appropriateness of the joint programs. (Contains 1 table and 4 figures.)