Combining remarkable economic transition and dynamic growth, China may well have the most fascinating economy in the world. Over the period of economic reform China has moved from an administered labour system towards the creation of a labour market. The scale of this transformation, involving new economic incentives, vast labour migration, draconian retrenchment of state workers, and sharply rising wage inequality, is unprecedented in world history. The authors draw on more than a decade of their research to document and analyse this process. The book uses the rigorous analysis and empirical methodology of modern economics. Much of the evidence used is survey- based but a systematic approach is adopted: economic and sociological theory, institutional analysis and political economy are also used to explain the causes, pressures, obstacles and consequences of the move towards a labour market. It is argued that much progress has been made towards the creation of a labour market but that the process is far from complete. This is reflected in the growing importance of productivity to wages, on the one hand, and the growing wage segmentation across regions and firms, on the other. The underlying policy issue is the tension and trade-off between efficiency and equity objectives, stressed throughout the book.