Large cities in China are facing serious problems associated with deterioration of water environments that has accompanied rapid economic growth. This paper discusses a case study of the situation of the city of Xi'an and the potential for improving infrastructure and transferring water rights between sectors for water conservation and mutual benefit. It was found that by transferring water rights between the agricultural and industrial sectors, for instance, that 18.6 million tons of groundwater and 6.9 million tons of surface water could be conserved every year, while at the same time improving the agricultural irrigation system.