China has been reforming its domestic natural gas market in recent years, while construction of storage systems is lagging behind. As natural gas accounts for an increasing proportion due to the goal of carbon neutrality, large-scale gas storage appears to be necessary to satisfy the needs for gas peak shaving and national strategic security. Additionally, the domestic gas production in China cannot meet consumption demands, and imports will play a significant role on the supply side. This paper developed a system dynamics (SD) model and applied it to simulate gas market behaviors and estimated China’s gas storage capabilities and import demands over the next 40 years. To achieve carbon neutrality, it is necessary for China to make great progress in its energy intensity and improve its energy structure, which have a great impact on natural gas consumption. Thus, alternative scenarios were defined to discuss the changes in the gas market with different gas storage goals and environmental constraints. The results show that under low and medium carbon price scenarios, natural gas demand will continue to grow in the next 40 years, but it will be difficult to achieve the goal of carbon neutrality. Under the high carbon price scenario, natural gas consumption will grow rapidly and reach a peak in approximately 2040, after which renewable energy will play a more important role to help achieve carbon neutrality. At the peak time, China’s gas storage demand will be 205.5 billion cubic meters (bcm) and import demand will reach 635.4 bcm, accounting for 72.8% of total consumption. We also identified the contradiction between the estimated storage capability, import demand and infrastructure planning. There will be a gap of 28.1–69.3 bcm between the planned storage capacity and simulated demand by 2030, while import facilities may partly strand assets. Finally, we provided some policy recommendations for constructing gas storage and import management and operation systems.

China considers the healthy and sustainable development of the natural gas market to be crucial for achieving carbon neutrality and has been actively reforming its natural gas market to optimize the energy and economic structure. While previous studies have discussed the effectiveness of policy measures, there is a lack of simulation research and quantitative analysis on the impact of reform measures in China. This study addresses this gap by constructing a numerical simulation model based on China’s long-distance pipeline network and natural gas market, calibrated to 2019 as a pre-reform baseline and extended to the partially reformed market of 2024–2025. The model includes a base scenario to replicate real market conditions and two policy scenarios that incorporate market-oriented reform measures such as deregulation of prices, pipeline separation and interconnection. The effects of these measures on gas allocation and social welfare are examined. The results indicate that (1) pipeline separation and price deregulation increase social welfare, with welfare shifting from consumers to producers and distributors; (2) natural gas consumption and price changes exhibit pronounced regional heterogeneity, even though prices rise overall, reflecting the complexity of policy effects; (3) the reform follows a path of diminishing returns, and the current stage policy already captures about half of the welfare gain and most of the price adjustment, while shielding consumers from much of the surplus loss. Finally, we conclude with policy implications for China’s natural gas market reform. As these reform measures are now being implemented, the quantified welfare and price effects also offer a timely, model-based reference for assessing China’s ongoing gas-market marketization.