Don't drink it straight from the tap. Most hotels will tell you the same. What people drink here is bottled water, or water that has been boiled — and in practice, mostly the boiled kind, drunk hot. Bottled water is cheap and sold everywhere. If you have a sensitive stomach, just stay on bottled water for the whole trip and stop thinking about it.
What people actually drink
The habit that surprises visitors most is the temperature. Water here is usually drunk hot, out of a flask or a thermos, all year round — in summer too. A kettle in the hotel room is not decoration; it is how the room is meant to work.
At the same time, bottled water is genuinely cheap and genuinely everywhere: corner shops, petrol stations, village shops, hotel lobbies. Between the two, nobody in China is stuck for something safe to drink, and neither will you be.
Why the tap is not the answer
It is not treated here as drinking water, whatever the standard behind it is. People boil it. That habit is the practical answer: it is what everyone around you does with the water that comes out of the wall, and it is a reasonable thing for a visitor to copy.
This matters most in the small places, which is where a trip like this spends its time. A guesthouse in a village is not a hotel in Chengdu, and the sensible default is the same in both: bottled, or boiled.
Practical notes
Buy water by the case rather than the bottle if you are heading out for several days — it costs very little, and the further you get from a town, the more useful it is to already have it in the car. Keep a bottle with you on the drives; the dry air on the plateau makes you drink more than you expect.
One thing that is not a water problem but gets blamed on water: altitude. If you feel unwell up high, read the altitude page before you conclude anything about what you drank.
Questions I get on this one
Can I drink the water in hotels on the plateau?
Do restaurants serve tap water?
Is ice a problem?
What if I have a medical reason to be careful about water?
Written from living and working here rather than from a guidebook. Related: toilets · what everyday things cost · all essentials