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Large hospitals in China are overcrowded, while primary care tends to be underutilized, resulting in inefficient allocation of resources. This paper examines the impacts of a policy change in a mandatory public employee health insurance program in China designed to encourage the utilization of primary care by reducing patient cost-sharing. We use a unique administrative insurance claim dataset from the Urban Employee Basic Medical Insurance (UEBMI) scheme between 2013 and 2015. The sample includes 40,024 individuals. We conduct an event-study analysis controlling for individual fixed effects and find that the change in cost-sharing increased primary care utilization, decreased non-primary care utilization, and increased total outpatient utilization without impacting total spending. In addition, the policy change did not affect the likelihood of having avoidable inpatient admissions. Further, patients with hypertension or diabetes increased their primary care utilization even when using additional coverage for patients with chronic diseases, the cost-sharing rates for which did not change during the period of our study, rather than their standard UEBMI benefits. This study provides evidence that changes in cost-sharing can affect healthcare utilization, suggesting that supply-side incentives can play an important role in building a primary care–based integrated healthcare delivery system in China. • A change in cost-sharing for primary care increased primary care utilization. • The policy change also led to a decrease in non-primary care utilization. • Incentives can help build a primary care–based integrated healthcare system. [ABSTRACT FROM AUTHOR]