The leap-forward development policy emphasizes water resource scarcity. Given the importance of water resources to an economy, especially in arid areas, this paper explores various management strategies that could be used in the semi-arid region of Xinjiang to increase the effectiveness and efficiency of multifunctional water projects and support sustainable ‘leap-forward’ economic growth. Embedding the logistic growth function within a system dynamics framework, our model provides a universally implementable model for sustainable water planning. The dynamic current and projected water supply and demand and water use efficiency are captured. Potential water management strategies are simulated to test system performance. The results suggest that, as water scarcity becomes more acute, the current water supply will not be able to support the leap-forward development policy with current water usage efficiency. In the short term, implementing efficient industrial water consumption technology and promoting water-saving irrigation technology may postpone the cultivated land reduction process. In the long term, developing more water-saving industrial enterprises, and planning to use more drought-tolerant plants, will be effective ways to avoid a decrease in cultivated land area.