Since 2005, breakthrough in the production of shale gas, an unconventional source of natural gas, has changed the energy structure and outlook of the United Statues. It has also helped the US to significantly reduce its CO2 emissions, allowing it to achieve the lowest CO2 emission per capita since the 1970s. China is estimated by the U.S. Energy Information Administration(EIA) to have the world greatest shale gas reserve. Hence, China is actively looking into developing shale gas as one of its major energy sources. However, there is still little understanding of the limitation or constraints for China in its development or utilization of its shale gas reserves. The objective of the study is to provide an up to date picture of shale gas development, gas potential and constraints (e.g.water, gas distribution network) in China, and to put this information into an overall energy supply and demand picture for China using the energy balance framework. We shall also show that the detail energy balance information available published by the government allow for a detailed analysis of the energy management options in China.