Water pollution from small rural industries is a serious problem throughout China. Over half of all river sections monitored for water quality are rated as being unsafe for human contact, and this pollution is estimated to cost several per cent of GDP. While China has some of the toughest environmental protection laws in the world, the implementation of these laws in rural areas is not effective. This paper explains the reasons for this implementation gap. It argues that the factors that have underpinned the economic success of rural industry are precisely the same factors that cause water pollution from rural industry to remain such a serious problem in China. This means that the control of rural water pollution is not simply a technical problem of designing a more appropriate governance system, or finding better policy instruments or more funding. Instead, solutions lie in changes in the model that underpins rural development in China.