This paper analyzes the contribution of capital and labor inputs and technical change to the growth of output in the manufacturing sector for nine provinces in China during the period 1978-1988.We use a flexible translog production function to analyze each province’s growth process instead of estimating the parameters econometrically.The result shows that even though there are somewhat regional differences,the contributions of capital to regional economic development is the most significant,whereas the contributions of labor to industrial growth are not positive but negative to the regional industrial growth.That means that the problems of surplus employment are very serious for state-owned enterprises and that to leave away surplus employee is the most urgent countermeasure for the state-owned enterprises.