Rapid urbanization in China has caused severe water and environmental problems in recent years. To resolve the issues, the Chinese government launched a sponge city construction program in 2015. While the sponge city construction initiative is drawing attention and is spreading fast nationwide, some challenges and risks remain. This study surveyed progress of all 30 pilot sponge cities and identified a broad array of challenges from technical, physical, regulatory, and financial, to community and institutional. The most dominant challenges involve uncertainties and risks. To resolve the issues, this study also identified various opportunities to improve China's sponge city construction program. Based on the results, recommendations are proposed including urging local governments to adopt sponge city regulations and permits to alleviate water quality and urban pluvial flooding issues, fully measuring and accounting for economic and environmental benefits, embracing regional flexibility and results-oriented approaches, and focusing on a wider range of funding resources to finance the sponge city program. Coordination among other government agencies is critical, and this is true at all level of governments. Only through greater coordination, education, and broader funding could the sponge city program be advanced meaningfully and sustainably.