The Chinese government has introduced numerous policies and development plans to boost its shale gas industry in recent years. However, China’s shale gas exploration and development is still in the initial stage and has been confronted with many challenges. This paper systematically analyzes the current status of China’s shale gas industry from five aspects for the first time—resource situation, exploration and development status, policy and planning situation, technology status and international cooperation—then respectively elaborates on the different obstacles of shale gas development in the short run and the medium and long term. We argue that short-term barriers to the Chinese shale gas industry mainly include objective factors, such as geological and surface conditions, shale gas proven reserves, technology innovation and environmental concerns, while some man-made obstacles (except for water scarcity) may restrict shale gas development in the medium and long term. In order to better tackle the short-term challenges, this paper proposes policy recommendations from five perspectives: strengthening the investigation and evaluation of China’s shale gas resources; perfecting shale gas industry policy; establishing a national shale gas comprehensive experimental zone; enhancing scientific and technological research; and establishing a shale gas regulatory system with an emphasis on environmental protection and supervision.