Despite efforts by the Chinese government to reduce rural poverty in recent decades, the extent of poverty in many mountainous areas of rural China is still high. To survive, rural residents in these areas are often forced to over-exploit the already stretched natural resources; the end result being serious degradation of the natural environment. This lowers productivity and rural incomes, which exacerbates the problem. This paper discusses a variety of factors that contribute to this poverty cycle in China’s mountainous areas and explores countermeasures that may help break the cycle while encouraging sustainable development.