Watershedsprovideavarietyofecologicalservicesincludingsoilandwaterconservation,carbonsequestrationandbiopersityprotection.However,activitiesinafast-growingeconomysignificantlyimpactthesupplyanddemandofthesewatershedservices.Tomitigatetheseimpacts,theconceptofpaymentforenvironmentalandecosystemservicesfromwater-shedshasemergedinglobalacademicandpolicycircles.ThegovernmentsandacademiccommunitiesinChinahaveincreas-inglydescribedpaymentsforecologicalservicesfromwatershedswiththeconceptofwatershedeco-compensationasitisurgenttoprotectwatershedecosystems.Watershedeco-compensationhasprovedtobeoneofthemosteconomicallyeffectivemeansofsolvingenvironmentalproblemsofwatershedstobeadoptedbytheChinesegovernment.ThispaperpresentsanobjectiveanalysisoftheChinesemarketforwatershedecosystemservices,includingsupplyanddemandfortheservices.ItalsosummarizesChinesepoliciesonwatershedeco-compensation,includingrelevantlawsandregulationsandfiscalpolicies.Inaddition,itpresentsare-viewofChinesepracticesinwatershedeco-compensation,in-cludingtheanalysisofanecologicalconstructionprojectinWest-ernChina,inter-provincialwatershedeco-compensationpracticesandplans,andpaymentforecologicalservicesattheprovincialandsmallwatershedlevels.Finally,itsummarizesthekeycom-ponentsoftheprocessofpaymentinChinesewatershedeco-compensation.Thisdiscussionformsthebasisofconcludingsuggestionsforecosystemservicescompensationandecologicalprotectioninthelargescaleriverbasin.
