Payments for ecosystem services (PES) provide innovative solutions for
global environmental governance. China, the largest developing country,
always faces serious ecological and environmental problems. China
created an Ecological compensation mechanism which combines the PES
mechanism with the government’s standardized management, which has
achieved remarkable results. Government-led, social participation, and
market-oriented operation are its main characteristics. More
importantly, the mechanism helps China achieve its anti-poverty goals.
Part of its experiences have been transformed into formal institutions,
i.e., Grain-for-Green plan. However, some problems have also plagued
further development of it, such as the lack of environmental property
rights, the single source of funds and the shortage of standardized
ecological value assessment technology. We suggest that it is necessary
to further improve the stability of China’s Eco-compensation mechanism.
The achievement of China’s Eco-compensation mechanism provides useful
guidance for other developing countries. For example, improving the role
of government administrative power, and the flexibility of the system
through the policy “sandbox” i.e., the policy pilot, encouraging the
participation of multi-stakeholder groups, and so on. Last but most
important, the policy and institutions must be closely integrated with
the state of the nation for it to be sustainable.