The tremendous growth of the industrial sector and urban population in developing countries has caused serious environmental problems including the deterioration of public water quality in urban areas. Privatization of the municipal water supply has been thought to be part of a broader public policy response to public enterprise service, mounting domestic and external debt levels, and unsustainable public sector deficits. A drop-off survey was conducted in urban China in order to estimate the needs of residents for improving the tap water quality. In this paper, we present the results of the costs for avoiding health risks by averting expenditures method. Then, choice experiment is applied for estimating the residents’willingness to pay. Finally, by using the cost-benefit analysis, the privatization of tap water in urban China is discussed. In conclusion, we propose the measures to meet residents’needs and that water privatization should not be enforced by the government but open to the involvement of the general public., 長崎大学総合環境研究, 12(2), pp.57-68; 2010