The service sector is the most rapidly developing area in the international trade field. For the past decades, the development of service trade has surpassed the growth of trade in goods in developed-western countries. The tourism industry, as the most significant component in service sector and one of the few major industries where China has gained international competitive advantages since joining the WTO, has attracted more and more attention. China's tourism industry has made great achievements since its reform and opening up in 1979. But it is still striving to increase the international competitiveness of China's tourism industry, aiming to transform into a great and powerful one. As one of the modern tourism industry’s most dynamically developing branch, cultural tourism has been recognized as one of the most active areas of global tourism demand. Considering the fast and steady development of China's tourism industry, China should put more emphasis on the cultural tourism division when making the development plan. From this perspective, this thesis suggests several strategies to develop China's tourism industry. First, this thesis will introduce the background of the tourism industry. Then it will define the term tourism industry and set a study landscape. Related studies and significance of this study will also be illustrated, followed by the definition and classification of cultural tourism, which is a new endeavor that has been rarely referenced. Second, the author will illustrate China's position among the world tourism industry based on WTO statistics and will introduce the influential factors according to Mr. Porter's "State Diamond" Model. Then will analyse the data using the SWOT method and make a comprehensive evaluation. Third, based on the above study, the author will suggest valuable development strategies for China's tourism industry: 1.successful experiences from benchmark countries which are advanced in cultural tourism; 2.optimization of the structure of tourism products using the culture and creativity; 3.promotion of the cultural tourism in ethnic minority areas such as Tibet; 4.optimization of the industrial organization structure by creating the brand effect and accelerating the system innovation; 5.enhancement of the education of the human resource in tourism industry to improve their professional quality; 6.highlight the government's role on a macro level to make favorable policy to support the cultural tourism industry.