Risk of HIV infection is high in Chinese MSM, with an annual HIV incidence ranging from 3.41 to 13.7/100 person-years. Tenofovir-based PrEP is effective in preventing HIV transmission in MSM. This study evaluates the epidemiological impact and cost-effectiveness of implementing PrEP in Chinese MSM over the next two decades. A compartmental model for HIV was used to forecast the impact of PrEP on number of infections, deaths, and disability-adjusted life years (DALY) averted. We also provide an estimate of the incremental cost-effectiveness ratio (ICER) and the cost per DALY averted of the intervention. Without PrEP, there will be 1.1-3.0 million new infections and 0.7-2.3 million HIV-related deaths in the next two decades. Moderate PrEP coverage (50%) would prevent 0.17-0.32 million new HIV infections. At Truvada's current price in China, daily oral PrEP costs $46,813-52,008 per DALY averted and is not cost-effective; on-demand Truvada reduces ICER to $25,057-27,838 per DALY averted, marginally cost-effective; daily generic tenofovir-based regimens further reduce ICER to $3675-8963, wholly cost-effective. The cost of daily oral Truvada PrEP regimen would need to be reduced by half to achieve cost-effectiveness and realize the public health good of preventing hundreds of thousands of HIV infections among MSM in China.