The launch of China’s national carbon market has already doubled the global emissions covered by carbon pricing programs and become the world’s largest carbon market. It is expected to be a crucial supporting instrument for China’s climate targets of achieving CO2 peaking before 2030 and carbon neutrality by 2060. The design of China’s national carbon market incorporates economic theory and international experiences, and more importantly, it fully considers China’s situation. This is reflected in its key features, particularly for the rate-based design instead of a mass-based system, which is essentially a multi-sector tradable performance standard. This paper reviews the development of China’s carbon market, introduces the design and rationale of some critical features, describes its latest progress along with encountered challenges, and offers insights into its phased development outlook.