The proper division of responsibility for environmental protection between national and state governments has long been the subject of fierce debate. During the 1970s the United States Congress decided to shift the most important environmental responsibilities from state governments to the federal government. The main reason for this decision was to prevent a ‘race to the bottom’ in that states competing for industries could otherwise be lax in implementing and enforcing federal environmental standards. Yet, some scholars have argued that there could just as easily be a ‘race to the top’ among states as they compete to attract people and businesses concerned with environmental protection. China, in turn, is plagued with severe air and water pollution and soil contamination, which is attributed largely to ineffective enforcement of its national environmental laws. This article investigates whether China’s experience confirms the race-to-the-bottom theory. It demonstrates that devolution of responsibility for environmental protection to lower levels of government tends to result in lax implementation and enforcement of national environmental laws, particularly where national governments also create strong incentives for economic growth. It concludes that China’s highly devolved system of environmental governance is consistent with this theory, even if it does not provide conclusive evidence of its correctness.