This study examines the impact of state equity ownership on firms’ performance for companies listed in China during the period 2002-2004. The results show that state ownership has a significant negative influence on corporate performance, and the relation between state shares and performance is indeed non-linear. Another type of ownership, legal person, however, is positively related to companies’ performance. Having a better monitoring skill and business connection with other enterprises, the legal person shares contribute to better performance. With regard to the determinants of state ownership, since the Chinese government is evolving towards more privatization, the surrender of its equity share to legal person supports the inverse relation between the two types of shares. As a new form of ownership in State-owned Enterprises, the present study also shows that the importance of legal shares grows over time. Other factors which might influence the degree of state ownership include the industry type and the market performance of companies. Lastly, further analyses on ownership structure suggest that the financial performance of companies with mixed ownership structure tends to be poor.