The paper discusses methods to compensate for the costs incurred in the supply of forest ecological services (FES), i.e. government dominated and market-based instruments as well as progress made so far in China. Factors which constrain the supply of these services and potential policy improvements are presented. The paper discusses methods to compensate for the costs incurred in the supply of forest ecological services (FES), ie government dominated and market-based instruments as well as progress made so far in China. Factors which constrain the supply of these services and potential policy improvements are presented.