This article examines the structure and problems of financing health care in the urban areas in China in light of the recent market-oriented reforms. It highlights the characteristics and major weaknesses of the existing financing and delivery systems, and examines a number of reform options and their effects on the various stakeholders of the health care system in terms of cost, quality and equity. Preliminary reports on the performance of the new systems are cited. The author recommends (1) the development of a tripartite contributory health insurance system for the better-off enterprises, (2) major changes within the existing Public Health Insurance Scheme, which will remain to cover the newly established civil service, (3) the temporary retention of the Labour Insurance Medical Care Scheme to cover the workers in ailing state corporations, and (4) the promotion of voluntary organizations to provide services to the indigence. He predicts that current reform efforts would not be effective in containing cost in the long term, and suggests more to be done in narrowing inequity and enhancing quality.