This paper analyses the role of the government in the development of the Chinese software industry. Since bringing the industry into existence, the government's presence in the software industry has remained far-reaching. It acts simultaneously as a buyer, supplier, regulator and promoter in this industry. Furthermore, these roles sometimes conflict with each other, resulting in the software firms' heavy reliance on a guanxi network. Although the government has significantly contributed to the fast growth of the software industry, it should gradually recede from centre stage as the industry matures.