Inactive chronic hepatitis B (CHB) carriers make up the largest group of hepatitis B virus-infected patients, and China bears the largest total CHB burden of any country. We therefore assessed the population health impact and cost-effectiveness of a strategy of lifelong monitoring for inactive CHB and treatment of eligible patients in Shanghai, China. We used a computer simulation model to project health outcomes among a population cohort of CHB based on age-specific prevalence of hepatitis B surface antigen (HBsAg), hepatitis B e antigen (HBeAg), and cirrhosis. Using a Markov model we simulated patients' progression through a discrete series of health states, and compared current practice to a monitor and treat (M&T) strategy. We measured lifetime costs and quality-adjusted life years (QALYs) (both discounted at 3% per year), incremental cost-effectiveness ratios (ICERs), and clinical outcomes such as development of hepatocellular carcinoma (HCC). We estimated that there are 1.5 million CHB-infected persons in Shanghai. The M&T strategy costs US$20,730 per patient and yields a discounted QALY of 15.45, which represents incremental costs and health benefits of US$275 and 0.10 QALYs compared to current practice, and an ICER of US$2,996 per QALY gained. In the base case, we estimated that the M&T strategy will reduce HCC and CHB-related mortality by only around 1%. If variables such as adherence to monitoring and treatment could be substantially improved the M&T strategy could reduce HCC by 70% and CHB-related mortality by 83%. Conclusion: Lifelong monitoring of inactive CHB carriers is cost-effective in Shanghai according to typical benchmarks for value for money, but achieving substantial population-level health gains depends on identifying more CHB-infected cases in the population, and increasing rates of treatment, monitoring, and treatment adherence.