The Clean Development Mechanism under the Kyoto Protocol has been in place in China for several years, and today, China exists as the global center of CDM project development. Although the CDM has brought and is expected to bring considerable benefits to China, its limited and in some cases negative impacts may affect China’s sustainable development in the long run. Moreover, as the first Kyoto period is set to expire in 2012, the climate legal regime and the CDM are likely to be changed. The limitations of the CDM in promoting sustainable development in China beyond 2012 could be addressed by setting up clear sustainable development standards, effective management of the CDM, and legal strategies for emission reductions.