The authors propose a framework for understanding transformational leadership and its impact on China’s historic transformation. The analysis proposes a model that furthers innovation and entrepreneurship in China. The purpose is to show the dynamics of reform that affect product innovation and entrepreneurship. The major question the authors ask is, Why does leadership fail at the policy level and organizational level? The authors propose that the answer lies in the failure to innovate. The authors look at effective change management. In part, the research stems from over 350 interviews in China with professional level influencers beginning in 1988 and most recently in the summer of 2013. Furthermore, the authors explore the latest research on leadership activities generally and how it relates to the ongoing China transformation. Finally, the authors provide specific strategic suggestions for navigating in the China market.