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The film received critically mixed reviews when it was first released but has since enjoyed a reappraisal. It currently has an 83 percent rating on Rotten Tomatoes. Ron Base, in his review for the Toronto Star, praised Russell's performance. "He does a great John Wayne imitation. But he's not just mimicking these heroes, he is using them to give his own character a broad, satiric edge". Walter Goodman in the New York Times wrote, "In kidding the flavorsome proceedings even as he gets the juice out of them, the director, John Carpenter, is conspicuously with it". Harlan Ellison praised the film, writing that it had "some of the funniest lines spoken by any actor this year to produce a cheerfully blathering live-action cartoon that will give you release from the real pressures of your basically dreary lives". In his review for Time, Richard Corliss wrote, "Little China offers dollops of entertainment, but it is so stocked with canny references to other pictures that it suggests a master's thesis that moves".

However, in his review for the Chicago Sun-Times, Roger Ebert wrote, "special effects don't mean much unless we care about the characters who are surrounded by them, and in this movie the characters often seem to exist only to fill up the foregrounds", and felt that it was "straight out of the era of Charlie Chan and Fu Manchu, with no apologies and all of the usual stereotypes". Paul Attanasio, in the Washington Post, criticized the screenwriters for being "much better at introducing a character than they are at developing one". David Ansen wrote, in his review for Newsweek, "though it is action packed, spectacularly edited and often quite funny, one can't help feeling that Carpenter is squeezing the last drops out of a fatigued genre". In his review for The Times, David Robinson felt that Carpenter was, "overwhelmed by his own special effects, without a strong enough script to guide him".

After the commercial and critical failure of the film, Carpenter became very disillusioned with Hollywood and became an independent filmmaker. He said in an interview, “The experience [of Big Trouble] was the reason I stopped making movies for the Hollywood studios. I won’t work for them again. I think Big Trouble is a wonderful film, and I’m very proud of it. But the reception it received, and the reasons for that reception, were too much for me to deal with. I’m too old for that sort of bullshit”. Since its initial release it has developed a cult following and is now well received by critics. Empire magazine voted Big Trouble in Little China the 430th greatest film in their "500 Greatest Movies of All Time" list.