China’s industry accounts for 46.8% of the national Gross Domestic Product (GDP) and plays an important strategic role in its economic growth. On the other hand, industrial wastewater is also the major source of water pollution. In order to examine the relationship between the underlying driving forces and various environmental indicators, values of two critical industrial wastewater pollutant discharge parameters (Chemical Oxygen Demand (COD) and ammonia nitrogen (NH4
-N)), between 2001 and 2009, were decomposed into three factors: i.e.
, production effects (caused by change in the scale of economic activity), structure effects (caused by change in economic structure) and intensity effects (caused by change in technological level of each sector), using additive version of the Logarithmic Mean Divisia Index (LMDI I) decomposition method. Results showed that: (1) the average annual effect of COD discharges in China was −2.99%, whereas the production effect, the structure effect, and the intensity effect were 14.64%, −1.39%, and −16.24%, respectively. Similarly, the average effect of NH4
-N discharges was −4.03%, while the production effect, the structure effect, and the intensity effect were 16.18%, −2.88%, and −17.33%, respectively; (2) the production effect was the major factor responsible for the increase in COD and NH4
-N discharges, accounting for 45% and 44% of the total contribution, respectively; (3) the intensity effect, which accounted for 50% and 48% of the total contribution, respectively, exerted a dominant decremental effect on COD and NH4
-N discharges; intensity effect was further decomposed into cleaner production effect and pollution abatement effect with the cleaner production effect accounting for 60% and 55% of the reduction of COD and NH4
-N, respectively; (4) the major contributors to incremental COD and NH4
-N discharges were divided among industrial sub-sectors and the top contributors were identified. Potential restructuring and regulation measures were proposed for pollutant reduction.