China has almost 400 Mhm² of grasslands, 90% of which is considered degraded to varying degrees, on which 16 million herders depend for their livelihoods and many more indirectly, along the value-adding chain. Since 1950, average stocking rates across China have increased 4-fold. National policies have focused over recent decades on finding ways to rehabilitate the degraded grasslands, to sustain livestock production from them, and to improve the livelihoods of herder households, who are among the poorest people in China. A large collaborative program commenced in the early 2000s to help find solutions to the sustainable management of grasslands. This paper summarizes key findings of many research projects, identifies where knowledge is weak and argues that the successful rehabilitation of grasslands will also require policies that provide incentives and support for herders as they move from a focus on survival to a focus on production of higher quality products, for which consumers are increasingly willing to pay. A key focus is to emphasize the improvement of animal production per head. When this is done, it naturally leads to lower stocking rates, which in turn provides the opportunities for grasslands to recover. Across a range of experiments, farm demonstrations and analyses using models, in Inner Mongolia and Gansu, a consistent result has been that a 50% reduction in stocking rates, improves net household income and starts the process of grassland rehabilitation. Rather than focusing on stocking rates, better management of grasslands could be achieved by maintaining the grasslands above critical values for herbage mass, values that help optimize botanical composition, reduce soil erosion, optimize animal growth rates and aid ecosystem functions. Managing to critical values for herbage mass is likely to be more effective than efforts to calculate sustainable stocking rates. An early summer rest is valuable for aiding grassland rehabilitation and summer productivity, but a total grazing ban (typically for 5 years) may not achieve its aims as evidence shows it may take 10–15 years to achieve a better grassland state. Less-desirable plant species often increase in degraded grasslands that are rested and grazing can help manage those species. Surveys of herders indicate they have very mixed views on the benefits of total grazing bans that are unlikely to rehabilitate grasslands to an ideal botanical composition. The current objective is to work with grasslands that herders now have and optimize the existing composition. Grazing grasslands in winter results primarily in weight loss by animals and there is now evidence of how winter grazing reduces grassland growth in the next summer. It is better to keep animals in well-built sheds and feed them better, improved feeding through the cold months is required. In addition to the application of results from national programs designed to improve grasslands, it will be important to train herders as they move from survival to production, to foster the development of better markets for their livestock products, to devise better financial support for herder businesses and to revise land tenure arrangements so that herders can expand the area of land they graze on better terms than apply at present.