Shakespeare uses puns wherever possible in his plays, which has posed difficulties in interlingual practices. The analysis of Fu Guangming’s translation of The Merchant of Venice, in the light of the three element-model of puns proposed by Hill Archibald, dis-covers that only one among all the puns found an equivalent hedge in the target text, and in most of the other cases, the compensatory method is used, with an annotation for each case. Annotations in the translation provide communicative clues for readers to realize the existence of puns and make up for the pragmatic loss incurred. The annotations also help readers to understand the play and recreate a world similar to that of puns in Shakespeare’s time. However, dilemmas still exist in the translation of puns in Shakespeare’s plays into Chinese,which calls for annotations provided by the translator to help readers’ intercultural understanding by connecting them with the plays temporally and spatially.