China—the largest developing country in the world—is experiencing both rapid economic maturation and large-scale urbanization. These situations have led to waste disposal problems, and the need to identify alternative energy sources. Waste-to-energy (WTE) conversion processes, a source of renewable energy, are expected to play an increasingly important role in China’s sustainable management of municipal solid waste (MSW). The purpose of this research is to investigate the key problems and opportunities associated with WTE, to provide recommendations for the government. This paper begins by describing China’s current MSW management situation and analyzing its waste disposal problems. The major challenges associated with China’s WTE incineration are then discussed from economic, environmental and social points of view. These include the high costs associated with constructing necessary facilities, the susceptibility of facilities to corrosion, the lower heating value of China’s MSW, air pollutant emissions and especially public opposition to WTE incineration. Since discarded waste can be used to produce energy for electricity and heat—thus reducing its volume and the production of greenhouse gas (GHG) emissions—with government policies and financial incentives, the use of WTE incineration as a renewable energy source and part of a sustainable waste management strategy will be of increasing importance in the future. The paper concludes by summarizing the management, economic and social benefits that could be derived from developing the country’s domestic capacity for producing the needed incineration equipment, improving source separation capabilities, standardizing regulatory and legal responsibilities and undertaking more effective public consultation processes.