OBJECTIVES: A 7-valent pneumococcal conjugate vaccine (PCV7) was launched as a Category II vaccine requiring out-of-pocket payment in China in 2008. This study evaluates the potential economic benefits of introducing a public financed City Immunization Program (CIP) to pay for PCV7 from a payer perspective.    METHODS: A decision-analytic model was populated with local direct cost and seroprevalence data from case records of 3 hospitals (1 Children’s Hospital; 2 Comprehensive Hospitals) and literature to estimate the clinical and economic impact of no PCV7 vaccination, PCV7 Category II listing, and PCV7 CIP in the city of Shenzhen. Various sources of data were used to estimate the primary statistics including age-specific incidence/mortality of invasive pneumococcal disease (IPD), pneumonia and otitis media, local patient demographics, and PCV7 efficacy from clinical trial data. The indirect effect on unvaccinated populations was considered by estimating the reduction in adult IPD cases following PCV7 programs published overseas, and was only applied in the CIP scenario where broad vaccine coverage could be achieved. A discount rate of 5% was applied, and one-way sensitivity analyses were performed as well. RESULTS: Under the current setting, the Category II vaccine PCV7 is not cost-effective due to the private market unit price and low penetration rate. However, vaccination of 154,721 children under 2 years old from a public financed CIP in Shenzhen would prevent 18 IPD, 5887 hospitalized pneumonia, 20020 outpatient pneumonia, and 10669 otitis media cases if indirect effects are included, compared to no vaccination program.  From a payer perspective, a PCV7 CIP would achieve an ICER of RMB61, 243 (USD9, 141) per QALY versus no vaccination, and dominant versus Category II. CONCLUSIONS: Results from this study indicate a PCV7 CIP would be a highly cost-effective intervention from a public payer’s perspective.