Significant changes in land use and land cover have occurred in Menglun Township, Xishuangbanna Autonomous Prefecture, southwest China. This is a region of high agro-ecological diversity representative of the general biophysical and socioeconomic conditions of Xishuangbanna. An analysis of satellite images showed that from 1988 to 2003, rubber plantations increased by 324%; this expansion generally occurred at the expense of forests and shifting agriculture. Most rubber expansion was in the lowland areas, where suitable microclimates and proximity to roads favored the development of the rubber industry. Economically, all the villages showed an improved living standard; from 1988 to 2003, the total net income of the township increased from CNY 4 million (US$ 0.49 million) to CNY 44 million (US$ 5.49 million). The increasing population and rising living standard of the area will put greater pressure on the environment and available land resources. Although the government considers rubber and other plantations such as tea and sugar to be ‘green industries,’ the loss of tropical rainforest and agricultural lands (including diverse shifting agriculture) suggests that the potential impacts of policies to promote green industries should be considered carefully. Communities such as those in northern Laos, where the rubber industry is now expanding rapidly, are likely to experience a similar scenario.