This study applies theories of systems and system dynamics to ecological economic systems in the oasis environment, with the intention of finding the basic characteristics of the oasis environment and its feedback structures. This study explores the inner mechanisms of economic development in the oasis environment and its relationship to policy variables. This model is applied to economic development in the Manas oasis of the Xinjiang Uygur Autonomous Region of China. System dynamics method starts from studying feedback structure within the system study and then searches for the best solution through identifying the right "policy point" and through model simulation in the computer. It embodies the cream of "systems cybernetics theory". This study is justified because the nature of the oasis system and the simulation results are scientifically sound and practically feasible.