Abstract: The ultimate ownership and firm's total factor productivity (TFP) were calculated on the basis of the panel data of manufacturing companies listed in China from 2003 to 2007. A fixed effect model was developed to study the relationship between the ultimate ownership and firm's TFP. The regression results show that there is a significant cubic curve relationship between ultimate ownership and firm's TFP. The relationship changes clearly twice when the ultimate ownership rises, i.e., if the ultimate ownership is below 0.30, it is positively related to the TFP. However, the relationship becomes negative while the ultimate ownership is in the interval of [0.30, 0.75]. Further, if the ultimate ownership is above 0.75, the relationship becomes positive once again. The results indicate that the ultimate ownership has a significant governance effect and can influence the TFP.