To accomplish sustainable economic development,China needs to speed up the development of tertiary industry,especially modern service industry,which highly depends on social trust,well-functioned legal system and institutions,and information disclosure on products or services supported by institutional system.The institutional circumstances needed by tertiary industry are different from those needed by secondary industry.In this paper we analyze the status quo of tertiary industry in China and point out that although the economic volume has increased greatly since opening-up,the proportion of value added of tertiary industry to GDP in China is all along much lower than those in developed economies.Besides the impact of secondary industry,what restrains development of tertiary industry in China is lack of institutional circumstances from which development of tertiary industry benefits.Some suggestions are then put forward aiming at establishing institutional system that is fit for the development of tertiary industry in China.