How health care providers are paid affects how medicine is practiced. It is thus important to assess provider payment models not only from the economic perspective but also from the ethical perspective. China recently started to reform the provider payment model in the health care system from fee‐for‐service to case‐based payment. This paper aims to examine this transition from an ethical perspective. We collected empirical studies on the impact of case‐based payment in the Chinese health care system and applied a systematic ethical matrix that integrates clinical ethics and public health ethics to analyze the empirical findings. We identified eleven prominent ethical issues related to case‐based payment. Some ethical problems of case‐based payment in China are comparable to ethical problems of managed care and diagnosis related groups in high‐income countries. However, in this paper we discuss in greater detail four specific ethical issues in the Chinese context: professionalism, the patient‐physician relationship, access to care and patient autonomy. Based on the analysis, we cautiously infer that case‐based payment is currently more ethically acceptable than fee‐for‐service in the context of China, mainly because it seems to lower financial barriers to access care. Nonetheless, it will be difficult to justify the implementation of case‐based payment if no additional measures are taken to monitor and minimize its existing negative ethical implications.