Global terrestrial ecosystems absorbed carbon at a rate of 1-4 Pgyr-1 during the 1980s and 1990s, offsetting 10-60 per cent of the fossil-fuel emissions1,2. The regional patterns and causes of terrestrial carbon sources and sinks, however, remain uncertain. With increasing scientific and political interest in regional aspects of the global carbon cycle, there is a strong impetus to better understand the carbon balance of China. This is not only because China is the world's most populous country and the largest emitter of fossil-fuel CO2 into the atmosphere', but also because it has experienced regionally distinct land-use histories and climate trends, which together control the carbon budget of its ecosystems. Here we analyse the current terrestrial carbon balance of China and its driving mechanisms during the 1980s and 1990s using three different methods: biomass and soil carbon inventories extrapolated by satellite greenness measurements, ecosystem models and atmospheric inversions. The three methods produce similar estimates of a net carbon sink in the range of 0.19-0.26 Pg carbon (PgC) per year, which is smaller than that in the conterminous United States but comparable to that in geographic Europe. We find that northeast China is a net source of CO2 to the atmosphere owing to overharvesting and degradation of forests. By contrast, southern China accounts for more than 65 per cent of the carbon sink, which can be attributed to regional climate change, large-scale plantation programmes active since the 1980s and shrub recovery. Shrub recovery is identified as the most uncertain factor contributing to the carbon sink. Our data and model results together indicate that China's terrestrial ecosystems absorbed 28-37 per cent of its cumulated fossil carbon emissions during the 1980s and 1990s.