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The Chinese economy has experienced reform, rapid growth and a significant slowing down period over the last thirty years. During this time, the Chinese approach to people management has also shifted, with some observers suggesting a shift from personnel management into strategic Human Resource Management (SHRM). In many studies of SHRM, economic factors have been recognised to be essential external environmental forces which contribute to HRM strategy formulation (Schuler, 1992; Truss and Gratton, 1994, Boxall and Purcell, 2011). Under this argument, financial markets and the economic development of many countries have changed, the social and political environment has also been forced to adapt, and as a result, work, employment and HRM system of firms have been required to adjust to these changes. This thesis examines the specific effects of Chinese economic development on employers’ HR decisions, something which has been neglected in the SHRM literature to date. Employers in China, as elsewhere, may adopt different approaches to HRM development. For some, HRM systems in recent years have been built up from a low base, whilst others have adjusted well-established existing HRM approaches. Other employers have explored or implement radically different or ‘new’ approaches. These approaches can result in contradictions, tensions and resistance, due to differences between the rhetoric of seamless adjustment to ‘strategic’ HRM and the reality of what happens. All of these elements of HRM adjustment are underexplored in debates to date. The Chinese case is a particularly interesting lens through which to explore these under-researched issues due to its unique management contexts and the richness on social and economic transformation. The development of SHRM in China is ripe for exploration regarding how organisational HRM strategy does or does not supports operations. The key contribution of the thesis is in its examination of ‘fit’ and ‘non-fit’ of SHRM in Chinese firms. The thesis argues that changes in the external environment in China have led to different rather than uniform adjustments in HRM strategy and practices in individual firms. Adjustments that are often presented as necessary, being influenced or required by the state, or seen to be part of a ‘best practice’ approach to SHRM may or may not actually be implemented effectively in practice. However, even where effective implementation does not occur, resultant HR systems may still contribute to the growth and development of organisations. In this thesis, this examination of fit and non-fit is explored from the viewpoint of employers in the context of economic development in a transitional economy. The thesis also provides insights into how and why contradictions in business strategy and development are significant, and in doing so, examines the efficiency of HR systems in China in terms of reacting to change. The empirical strategy for the research in this thesis involves qualitative research methods. A single case study of the Chinese financial service sector with multiple firms is used. Fifty-nine semi-structured interviews are conducted. The interviews were designed to explore employers’ responses to the external economic environment. Interviews were carried out with policy makers of government institutions, executive and general managers and HR directors from financial firms including state-owned and joint-stock banks, insurance companies and other financial institutions. The data generated from this research explores the drivers and effects of changes to HRM systems in two ways. First, the research identifies factors and events that cause concerns for firms, or which demand changes. Secondly, the thesis explores how these concerns or imperatives for change have, or have not been addressed and implemented in organisations. The findings reveal that specific economic development policies and changing economic cycles are recognized by employers, causing them concerns or compelling them to alter their skills mix or the number of workers they require. Differences in perceptions and approaches between state-owned firms and joint-stock firms are found to be significant. Some external factors which impact upon HRM strategy, such as political environmental factors lead firms to adjust their organisational governance systems and business strategy. The adjustment of specific HRM practices to external changes can be seen mostly in changes to recruitment and training strategy. The fit between business strategy and other HR practices, notably payroll systems and performance appraisals during different economic cycle stages, is less clear. However, even where ‘non-fit’ occurs, HR systems are still considered as working supportively to the growth of organisations. In conclusion, this thesis contributes to the theory of SHRM by developing a deeper understanding of fit and by illuminating the idea that actively choosing ‘non-fit’ at both strategic and implementation level can enhance the effectiveness of organisational operation under certain circumstances. It also contributes to the theoretical framework of SHRM through introducing the taxonomy of the role of economic factors and the state in China.