In this study, the evolution of precipitation efficiency (PE) and water budget of mesoscale convective systems (MCSs), which produced heavy rainfall over the South China Sea and southern Taiwan on 25–28 August 2015, are investigated using satellite observations and model simulations. The MCS is embedded within the southwesterly monsoon flow from Indo China with abundant moisture. The evolution of PE and water budget is first examined in a semi-Lagrangian framework following the movement of targeted MCS, and is confirmed in an Eulerian framework over the broad-scale area enclosing the MCS. The sensitivity of water budget and moisture fluxes to low-level moisture amount and horizontal wind speed is investigated.Water budget in the semi-Lagrangian framework shows that if the low-level large-scale moisture is increased (decreased) by 10%, the total condensation and deposition will be increased (decreased) by 10% (30–40 %); moisture flux convergence will be significantly enhanced within the MCS to generate more precipitation, and evaporation will be more pronounced over the region of weak convection. Similar results are found in an Eulerian framework. For the strong convective cells (radar reflectivity of greater than 35 dBZ) within the MCS, the calculated large-scale PE is 20–25% and the microphysical PE is 35–40%. The surface precipitation is highly sensitive to the large-scale moisture change, and less sensitive to wind-speed change. In particular, 10% decrease of low-level (below 700 hPa) relative humidity results in 10–20% decrease of moisture flux and 10–40% reduction of surface precipitation.