Based on a brief review of policy environment changes, and achievements of China’s production sectors, this paper examines major challenges for three production sectors: agriculture, industry and services, and finds significant progress has been made in agriculture, manufacturing and part of the service sector. These are attributed to market-oriented reforms and opening-up policies. At the same time, energy production and the majority of service sectors, which are owned and managed by the state, exhibit less progress. This is a major challenge for China’s production sectors. In order to achieve sustainable growth of China’s production sectors, further marketization reforms in the state-owned sectors, increasing fiscal expenditure on public goods, adjustment of the RMB exchange rate regime, and adjustment of FDI and export policies are required. These will help the Chinese economy to stand more self-dependent, and will bring about positive impacts on the world economy. Based on a brief review of policy environment changes, and achievements of China’s production sectors, this paper examines major challenges for three production sectors: agriculture, industry and services, and finds significant progress has been made in agriculture, manufacturing and part of the service sector At the same time, energy production and the majority of service sectors, which are owned and managed by the state, exhibit less progress. This is a major challenge for China’s production sectors. In order to achieve sustainable growth of China’s production sectors, further marketization reforms in the state-owned sectors, increasing fiscal expenditure on public goods, adjustment of the RMB exchange rate regime, and adjustment of FDI and export policies are required. These will help the Chinese economy to stand more self-dependent, and will bring about positive impacts on the world economy.