The Tanggu geothermal system is an extensive, highly permeable, horizontal sandstone reservoir, situated within the North China Sedimentary Basin. Twenty-three successful production wells, yielding water with an average temperature of about 70 degrees C, have been drilled into this reservoir since 1987, distributed over an area of some 330 km(2). The hot water is mostly used for space heating. In 1995 the annual production exceeded 5 million tons. Hot water extraction has caused the water level to drop to a depth of 80 m in the production wells, and it continues to decline at a rate of 3-4 m per year. This has raised the question as to whether the reservoir may be overexploited. The main objective of a reservoir evaluation carried out in 1996 was to estimate the long-term production potential of the Tanggu reservoir. Two simple models were developed for this purpose. The potential is determined by specifying a maximum allowable pump setting depth of 150 m. On this basis the potential of the Tanggu reservoir is estimated to be about 10 million tons per year, for the next ten years. A comprehensive reservoir management program must be implemented in Tanggu. The first priority of such a program should be to improve the energy efficiency of space heating in the district, which should result in about 50% reduction in hot water consumption. Another management option is reinjection, which would counteract the water level draw-down.