Water pollution and water shortage are the major challenge in China's economic growth. Based on the economic attributes of water resources and the evolution law of water pollution, examines the residents' water needs and the changes of water environment in the process of sustained economic development from the perspective of urban domestic sewage. Empirical analysis with the inter-provincial data shows that apart from the urban population, the current factors impacting China's urban wastewater discharge mainly include the disposable income of urban residents, water use habits, industrial structure and regulatory policies, etc. Solution to the problem of urban domestic sewage should be based on highlighting the value of water resources and establish a water resources management system which regards water rights management and emissions trading as the core system.