This paper evaluated the accuracy of multiple satellite-based precipitation products including the tropical rainfall measuring mission multisatellite precipitation analysis (TMPA) (TMPA 3B42RT and TMPA 3B42 version 7) and the Climate Prediction Center MORPHing technique (CMORPH) (CMORPH RAW and CMORPH BLD version 1.0) datasets and investigated the impact of the accuracy and temporal coverage of these data products on the reliability of the standardized precipitation index (SPI) estimates. The satellite-based SPI was compared with the SPI estimate using in situ precipitation observations from 2221 meteorological observation sites across China from 1998 to 2014. The SPI values calculated from the products calibrated with rain gauge measurements (TMPA 3B42 and CMORPH BLD) are generally more consistent with the SPI obtained with in situ measurements than those obtained using noncalibrated products (TMPA 3B42RT and CMORPH RAW products). The short data record of satellite precipitation data products is not the primary source of large errors in the SPI estimates, suggesting that the SPI estimate using satellite precipitation data products can be applied to drought assessment and monitoring. Satellite-based SPI estimates are more accurate in eastern China than in western China because of larger uncertainties in precipitation retrievals in western China, characterized by arid and semiarid climate conditions and complex landscapes. The satellite-based SPI can capture typical drought events throughout China, with the limitation that it is based on precipitation only and that different durations of antecedent precipitation are only suitable for specific drought conditions.