Climate change along with industrialization or urbanization, which uses materials with low water permeability and is accompanied by change in urban land use, are major reasons for frequent urban floods in many Chinese cities. Moreover, upgrading the drainage system can have numerous negative environmental impacts on the city, especially in districts with dense population and buildings. A new integrated urban water management (IUWM) strategy implemented in China, “sponge city,” has gained significant attention in recent years. In this study, a novel framework is built to analyze the effectiveness of sponge city by 3D simulating urban inundation results and performing a cost–benefit analysis. Construction and maintenance fees are included in the costs list, and carbon reduction, air quality improvement, rainwater harvesting, and reduction of flood risk are included under benefits. The district of Nangang in Harbin city in Northeast China was chosen as a case study area. Finally, we conclude that the maximum precipitation of 49.82 mm/h by sponge city can bring the inundation depth below a target depth in the target area. Further, though the sponge city project is not effective from a private perspective, it is effective from a social perspective.

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The recent increase in rainstorm waterlogging disasters has acutely threatened sustainable urban development in China. Traditional strategy to solve this problem is drainage capacity enhancing projects, which aims at enlarging the discharge of water. Recently, there is a new countermeasure emerged in Chinese cities: ‘Sponge City’, which aims at enlarging the absorption of water by increasing the curves of urban land. This article endeavours to make a comparison between these two countermeasures by building a framework to design and analyze the private or social costs of two projects which have the same rainwater control capacity. Finally, we have come to the conclusion that only considering initial cost, Sponge City unit cost is much more than drainage capacity enhancing project unit cost; considering external cost, Sponge City is not only competitive from an economical perspective, from an environmental perspective Sponge City is also competitive.

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