Through the policy instruments of subsidy and reward, the goal of China grassland eco-compensation is to achieve livestock reduction and grassland-livestock balance, eventually to slow down the grassland degradation under the condition of without reducing herders’ income. This paper firstly gives a theoretical framework to analyze the equivalent relationship between livestock reduction and compensation in the grassland eco-compensation scheme, and then conducts empirical study based on the field research in Chaganbulige Town, Siziwang Banner, Inner Monglia. The results show that the actual rate of overgrazing is undervalued by statistic result due to the spatial heterogeneity of overgrazing and the difference between herders. The compensation is not enough for the total area, and the reward for grassland-livestock balance to maintain enough compensation should be 28.5 yuan/hm². There exists serious non-equivalent relationship between livestock reduction and compensation, herders who do not need to reduce livestock take 47.9% of the funds and 0% of the total amount of livestock to be reduced, herders who need and be willing to reduce livestock take 5.5% of the funds and 1.2% of the total amount of livestock to be reduced, herders who need and be only willing to reduced part of livestock takes 46.6% of the funds and 98.8% of the total amount of livestock to be reduced. The expected proportion of livestock reduction to be achieved is only 8.3%. Due to the significant difference in the degree of overgrazing, the expected proportion of livestock reduction to be achieved is sensitive to neither the reward for grassland-livestock balance nor the loss per sheep unit. In order to achieve the purpose of the grassland ecological protection, to ensure the task of livestock reduction, we should take the degree of overgrazing as one of the elements of reward for grassland-livestock balance. Small and medium-sized holders are the main part of grassland overgrazing, so the true meaning of “taking overgrazing degree as one of the elements of reward for grassland-livestock balance” is “small and medium-sized holders should take more proportion of reward”. Except for the reward for grassland-livestock balance, reducing the number of small and medium-sized holders, expanding the scale of the pasture and promote the moderate scale management is the most important way to realize grassland sustainable development.