Based on the matching data of China’s industrial enterprise database and enterprise patent database, this study investigates the effect and mechanism of government subsidy policy on the innovation performance of Chinese enterprises using the panel data matching and multi-period difference-in-difference model. Results show that the incentive effect of government subsidy policy on enterprises’ innovation performance is dominant, thus improving the innovation performance of Chinese manufacturing enterprises. However, the promotion effect on lowquality innovation is greater than that on high-quality innovation. Moreover, the government subsidy policy affects the innovation performance of enterprises by stimulating enterprises to increase their R&D investment, increasing the spending on rent-seeking and taking on more social responsibility. The government subsidy policy significantly affects the innovation performance of non-state-owned enterprises, small and medium-sized enterprises, and technology-intensive industries. The impact of government subsidizing policies varies regionally. The policy effect on enterprise innovation performance is significant in the eastern and central regions but not in the western and northeast regions.