In the Chinese context, where rapid economic growth and unique cultural values interact with entrepreneurship, understanding Entrepreneurial Self-Efficacy (ESE) requires theoretical frameworks integrating Western theories and localised socio-cultural dynamics. The primary challenge in studying ESE in China is the reliance on Western models, which need to fully account for the country’s cultural, social, and political factors influencing entrepreneurship. This paper’s key aspects, such as collectivism, guanxi (social networks), Confucian values, and government intervention, profoundly affect ESE, requiring a more context-specific theoretical approach. This paper employs a comprehensive literature review to trace the development of ESE theory in both Western and Chinese contexts. Bandura’s theory of self-efficacy and Zhao’s work on entrepreneurial self-efficacy are critically analysed to identify the gaps and adaptations needed to understand ESE in China. The theoretical development of ESE in China reveals significant deviations from traditional Western models. Chinese entrepreneurs often build their ESE through social networks and government support, highlighting the importance of guanxi and state intervention. Additionally, Zhao’s framework, linking ESE to entrepreneurial intention and the role of education in enhancing ESE are critical for understanding China’s entrepreneurial ecosystem. This paper underscores the need for a localised theoretical foundation for ESE in China, integrating individual, cultural, and systemic factors. The study contributes to the theoretical foundation by expanding ESE theory to accommodate Chinese socio-cultural dynamics, offering a more robust framework for future research on entrepreneurship in China.