As the world’s largest grain producer, China’s straw yield was 700 million tonnes in 2014. With a national utilization rate of 80% in 2015, there is still a large amount of straw burned in open-field, resulting in air pollution and a reduction in the quantity available as a source of bioenergy. This paper conducts a literature review of success stories and major challenges in comprehensive straw utilization in and out of China. It is noted that nationwide long-term feasible and sustainable straw utilization at a high rate is a highly complex operation, involving most societal sectors, many people and facilities often at different regions. Scenarios were analyzed to estimate the energy potential and air emission reductions China would accomplish in 2020 by converting an additional 5 or 10% of straw-yield to biofuel. Currently, the approach to control straw burning in China is primarily administrative, relying heavily on prohibition and penalties, inconsistent across policy areas and geography, and lacking in long-term planning. Consequently, the effectiveness of the current approach is limited. The main cause of burning is a lack of infrastructure, effective preventive measures, and viable alternatives. Recommendations aimed at promoting a circular bio-economy around using crop straw as resources were provided, including improving straw utilization rates and reducing open-field burning.