This paper presents the concept of dynamic characterization of the carbonate gas condensate reservoirs, which mainly involves production analysis, material balance method and well test interpretation in combination with geological analysis results. This systematic technique can be fully integrated with the long-term low accuracy data of dynamic production and short-term high-precision data of transient well testing, in order to correctly evaluate the properties of the reservoir around the well, such as the formation permeability, well skin, oil drainage radius and dynamic reserve and so on. Then based on the results, the "dynamic characterization model" can be built to predict the performance of the wells. Take the development pilot blocks in Tazhong No.1 carbonate gas condensate field as an example to elaborate the details of this method. The results show that the new material balance equation can accurately calculate the original gas in-place of carbonate reservoirs in both fracture system and matrix system; the combination of analytical and/or numerical production analysis and well test analysis with production data constrained can correctly evaluate the formation permeability, well skin, and dynamic reserve; These three methods are integrated and constrained with each other, which can generate a reliable result; Both the material balance method and the "dynamic characterization model" are applied to the performance prediction of the wells and the block. This systematic technique has been successfully applied to "Tazhong No.1 Carbonate Gas Condensate Field Pilot Pre-Development Plan with 1 Billion Cube", which provides a reliable foundation for the effective development of Tazhong No.1 gas field.