China is facing growing water scarcity in many river basins due to rapid economic development, an expanding population, growing urbanization, and limited scope to develop new supplies. Water overdrafts, both from surface and sub-surface sources, are causing serious environmental problems ranging from the degradation of deltaic ecosystems of major rivers to aquifer depletion in North China. The attendant need to meet environmental water requirements is exacerbating the already tenuous problem of inter-sectoral water competition. The most widely advocated solution for the present and future environmental water management challenges of China involves the reallocation of water from agriculture to urban and environmental sectors. Such a solution can be myopic, unless potential repercussions on national food production and irrigating farmers are addressed. This paper identifies the role of increased water-use efficiency for enhanced environmental flows, and develops options for balancing environmental and food needs in China based on simulations using an integrated, global water–food projections model.