This paper makes an analysis of the rising trend of China's petroleum consumption, the oil supply potential of China and the entire world, as well as great pressure China is facing in emission reduction, putting forward an idea that development of bio-fuel is one of the important strategic measures in reducing the excessive reliance of economic development and social progress on petroleum and reducing CO₂ emission. It then makes a brief discussion on the idea that developing bio-fuel and bio-based material is the best way to utilize the biomass, which is followed by a comprehensive narration of the status quo of bio-fuel development in China and the entire world and a presentation of countermeasures for developing bio-fuel industry in China.