This paper examines the differences in perceptions of the importance and effectiveness of HR practices in firms operating in the People's Republic of China. The major finding is that while there are no significant differences between HR and line executives’ perceptions of the importance of each functional area in HRM, there are significant differences between line and HR executives’ perceptions of the effectiveness of these areas. Line and HR executives both view the issue of securing, developing, and maintaining human resources as a critical issue for the execution of daily operations and long-term strategic plans. However, line executives perceive HR performance effectiveness to be significantly lower than HR executives do in these functional areas. Therefore HR departments are not meeting the performance expectations of line executives. There are three possible reasons for the poor performance of HR departments. First, government intervention may limit HR departments’ ability to act strategically. Second, HR departments may not have enough power to act strategically. Third, HR departments may have few capabilities to respond to line executives’ demands.