The unbalanced development within the Chinese industries may bring the imbalance of in-come among different groups. What kind of role does industrial policy play,namely whether the implementation of China industrial policy brings the wage gap between enterprises? This paper considers subsidies as thebreakthrough point,introduces industrial policy factor into a heterogeneous enterprise model,and theoreticallydecomposes the impact of industrial policy on enterprise wages into two mechanisms,namely subsidytransfer effect and competition effect. And it puts forward the following hypotheses:the enterprises spend partof policy subsidies on production,and now more wages paid are equivalent to direct fiscal subsidies;at thesame time,enterprise wage level also depends on enterprise production efficiency,and industrial policychanges enterprise efficiency through promoting or inhibiting industrial competition,thereby having an indirectinfluence on enterprise wage level,namely competition effect. Next,this paper empirically checks abovetheoretical hypotheses by using the data of Chinese industrial enterprises above designated size from 1998 to2007. Specifically,the control variables are gradually added,and the variable reflecting subsidy policy has alwaysbeen a negative relationship with enterprise wage level. After controlling total factor productivity of enterprises,this relationship between subsidy policy and enterprise wage level becomes positive,while the impactof subsidies on total factor productivity of enterprises is negative. Then we can conclude that:negativecompetition effect resulting from China-style industrial policy through inhibiting enterprise efficiency exceedspositive subsidy transfer effect,finally leading to a reduction in enterprise wage level. This paper further exploresthe issue of a competition-friendly industrial policy based on Aghion et al.(2015)that shows the dispersionof government industrial policy coverage. Once industrial policy target is more extensive,the competitiveeffect of policy on enterprise wages will turn positive,and enterprise wage level will increase accordingly.These research conclusions help to understand the impact of industry policy on enterprise wages in the processof economic reform,enrich the related research of enterprise wages,and have enlightenment for deepeningthe reform:the unreasonable implementation of industrial policy has hindered the reform of basic wagesystem reform in China,and we can not bring some enterprises' revenues to subsidize the other;the fairness ofthis behavior is questionable,and how to give priority to efficiency as well as equity needs to be weighed carefullyand repeatedly by policy formulators. Subsidies for some enterprises can be converted into wage subsidiesfor skilled workers,which on the one hand,attract talents to enterprises and help enterprises to improveefficiency and on the other hand,avoid the negative effects resulting from direct subsidies for enterprises.