China faces daunting, although not insurmountable, challenges with respect to its water resources. Moreover, its endowment of water resources per capita is low and badly distributed, with the North China Plain having one of the lowest per capita endowments in the world. Current farming practices, if they are to meet the needs of China’s growing population, will also place increasing demand on irrigation capacity. A number of important river basins and watercourses also experience serious problems with pollution. Given these stark realities and emerging trends, current water management approaches are unsustainable. We make several suggestions on how to remedy the situation. Among these, we strongly suggest that correcting incentives and water management practices to raise the efficiency of its use should be a higher priority than reallocating water resources via the South to North water transfer project.