This paper employs China Industry Business Performance Data from 1998 to 2007 and marketization index to study the role of marketization in the promotion of the efficiency of eliminating backward production capacity.It comes to the conclusions as follows:firstly, marketization significantly improves overall industry entry rate and reduces overall industry exit rate but has heterogeneous effect on firm exit behavior; it reduces the exit possibility of high-productivity firms and improves the exit possibility of low-productivity firms; secondly, marketization level is in direct proportion to the productivity of exist firms relative to remaining firms and improves the productivity threshold of firm survival, thus improving the efficiency of eliminating backward production capacity; thirdly, distortion resulting from excessive intervention in the economy, SOEs' exit barriers and imperfect legal environment are institutional reasons for serious backward production capacity problem resulting from low-level marketization; fourthly, the distortion of resources allocation caused by motives like ensuring employment and GDP accounts for government failure.It should reduce policy intervention on firms, especially SOEs, solve to the difficulty in financial constraints in high-productivity firms, and fully exert the role of market in identifying and eliminating firms, to improve the efficiency of eliminating backward production capacity.