In recent years, China has experienced both rapidly growing trade and serious environmental degradation. The large literature on trade and environment lends some credence to the idea that these are causally related: trade growth for a relatively poor country is thought to shift the composition of industrial output towards dirtier products, aggravating environmental damage. However, much of China’s trade growth is attributable to the international fragmentation of production and the growing dominance of trade in parts and components. This kind of trade could lead to “cleaner” trade if fragmented production occurs in cleaner goods or China specializes in cleaner stages of production within these goods. Using Chinese environmental data on air and water pollution from the State Environmental Protection Agency and highly disaggregated trade data from China Customs, we present evidence that the pollution intensity of Chinese exports fell dramatically between 1995 and 2004. We then explore the possibility that trade fragmentation and foreign investment have played a role. Using the Copeland and Taylor (1994) framework, we develop a reduced form model of the pollution intensity of trade, incorporating standard determinants of a country’s production mix, such as factor proportions, income per capita, and trade policy. We explicitly incorporate the degree to which Chinese exports are fragmented, building on the work of Feenstra and Hanson (1996). We use this model to estimate the influence of increased fragmentation on the pollution intensity of trade over time. The evidence supports the view that increased foreign investment and production fragmentation have contributed positively to the decline in the pollution intensity of China’s trade, as has accession to the WTO and lower tariff rates. Chinese per capita real income growth is also positively associated with the trend toward cleaner trade.