China has been facing increasingly severe water scarcity, especially in the northern part of the country. China's water scarcity is characterized by insufficient local water resources as well as reduced water quality due to increasing pollution, both of which have caused serious impacts on society and the environment. Three factors contribute to China's water scarcity: uneven spatial distribution of water resources; rapid economic development and urbanization with a large and growing population; and poor water resource management. While it is nearly impossible to adjust the first two factors, improving water resource management represents a cost-effective option that can alleviate China's vulnerability to the issue. Improving water resource management is a long-term task requiring a holistic approach with constant effort. Water right institutions, market-based approaches, and capacity building should be the government's top priority to address the water scarcity issue.