The question of environmental governance has been of significant interest to the scholarly community in general and sinologists in particular. The current literature on environmental governance is researched and studied broadly under four domains, namely, globalization, decentralization, market and individual based governance, and cross-scale governance. In this paper one has tried to look into the question of environmental governance in a socialist market economy like China from the point of view of “decentralization”. The word “decentralization” here is to be understood in terms of a) central-local relations and b) state-society relations. The paper discusses some of the critical aspects related to these two facts of environmental governance by referring to existing literature in the field of domestic governance and politics in China. Further, the paper discusses some of the measures undertaken in China to tackle the question of environmental governance. The question of environmental governance is currently undergoing a phase of transition with new forms of “collaborative governance” and new forms of “public private partnerships”. However, what one gets to see that an apparently authoritarian China has demonstrated remarkable “political capacity” to constantly reinvent itself and been open to the idea of engaging the other stakeholders in tackling the problem of environmental governance.