China has experienced outstanding economic growth in recent decades, but not without environmental problems and costs. Environmental costs have included increased air and water pollution, loss of natural vegetation cover and deforestation, soil erosion and a decline in the fertility of the soil and biodiversity loss. Consequently, some writers have questioned whether China’s rate of growth is environmentally sustainable and doubt if China will attain middle-income status in the next century because of the environmental constraints facing it. Some suggest that China has already reduced its natural environmental resources to the critical core, or nearly so, and that there is a high risk that further reduction will undermine its economic sustainability. Certainly the risks from greater intensification of land use in China are high and some examples of such risks are given, for example, intensified use of the Yangzte Valley as a result of the Three Gorges Dam project. Market reforms in China provide greater scope for Chinese authorities to implement policies to deal with environmental problems by economic means, for example, to adopt polluter-pays principles. However, market-based policies are far from providing a complete answer to environmental problems in China. In response to environmental problems, Chinese authorities have drawn up China’s Agenda 21: White Paper on China’s Population Environment and Development in the 21st Century. It is an important step in recognising China’s environmental issues and suggesting policies to deal with these. China’s environmental problems involve several international dimensions. Some are of global concern such as China’s greenhouse gas emissions and its loss of biodiversity. Some have impacts on its near neighbours, such as environmental deterioration in the headwaters of rivers which commence in China and flow into South-east Asia and South Asia, or acid rains originating from China and transported to Korea or Japan. Another international dimension is the attraction of China for investment in dirty industries from places such as Taiwan. China needs to make sure that the full social cost of such foreign investment is taken into account.