This report presents the outcome of the World Bank’s analytical and advisory work to assess the status of water resources development and the key water issues and challenges facing the country. The Bank has also reviewed its history of cooperation with the Government of China in recent decades, and notes the remarkable achievements China has made in developing the water sector. The report proposes solutions for tackling the enormous challenges facing China in the sector. The central priority is to ensure sustainable utilization and management of water, land and related resources at the national, basin, regional and local levels. Despite relatively poor endowments of land and water by international standards, China’s economy has developed extremely rapidly over the last three decades, supporting 21 percent of the world’s population with 9 percent of the world’s arable land and only 6 percent of the world’s water while simultaneously lifting some 400 million people out of poverty. It is noted in the national water resources master plan recently completed by the Ministry of Water Resources (MWR) and the National Development and Reform Commission (NDRC) that China’s water resources are under stress from the combined demands of agriculture, industrialization, urbanization, population increases and improving living standards. The impact is evident in regional falling water tables, inadequate flows to the environment, pollution, and so on.