AbstractIn the past decade, Guangzhou (Canton), China, has produced mixed results in water pollution control: it has been successful in limiting pollution from industrial sources than from domestic ones. This article examines the case by reference to a growing body of literature in institutional analysis. The central arguments are that institutions affect the governance and management of natural resources by allocating decision‐making authorities among different individuals, agencies and levels of governments, by affecting whether rules and regulations can be effectively enforced and by creating different incentive structures. These arguments help to explain the divergent governmental efforts and outcomes in the two types of water pollution control in Guangzhou. The article concludes by discussing the case's theoretical and practical implication