China's unprecedented development of freeway systems has been one of the largest infrastructure investments in the country's recent history. Capacity analysis is key to the planning, construction, and classification of Chinese freeway systems. Incorrect capacity analysis could lead to either an overbuilt freeway system wasting valuable resources or an underbuilt freeway system that cannot meet the demand resulting from rapid economic development. A new method of freeway capacity analysis is presented that links the traffic flow model with highway safety requirements. The capacity derived from this method is theoretically sound and feasible in practice.