Grassland degradation is highlighted as a priority in Chinas environmental and climate change adaptation plans.There is a general consensus among officials and scientists that overgrazing is the main anthropogenic driver of grassland degradation in China.A range of laws,regulations,programs and approaches have been developed and applied to address this driver.Following clarification of user fights (grassland contracting),agreements were supposed to be signed with users to limit stocking rates.In many areas these have not been signed or if they have they have been found to be unenforceable.Recently the government has begun to develop pilot payment for ecosystem service schemes to provide incentives for maintaining sustainable stocking rates.This paper provides an analysis of the drivers of high stocking rates based on one case study in NW Sichuan.High stocking rates are driven by a high dependence of household income on sales of livestock products.The paper also describes the emerging grassland PES scheme.Proposed pilot schemes include incentive payments for destocking and maintaining low stocking rates,a compensatory payment for lost rural energy sources,and indirect payments in the form of grass seeds,rat poison and other material support.Drawing on insights from the case study,the paper discusses implications for approaches to the design of a voluntary,equitable and effective PES scheme in grassland areas of China,and highlights significant gaps in the understanding of pastoral household economies that present obstacles to design of voluntary and effective PES schemes.