The China Quarterly

Special Section on Inequality in China

Danwei Profitability and Earnings Inequality in Urban China*

Yu Xie and Xiaogang Wu


Prior research has debated the relative importance of such factors as human capital, political capital and region in determining workers' earnings in reform-era urban China. This article argues that a main agent of social stratification in contemporary China continues to be the danwei, the work unit. Using data from a 1999 survey we conducted in three large Chinese cities, Wuhan, Shanghai and Xi'an, we assess the extent to which workers' earnings (including regular wages, bonuses and subsidies) depend on the profitability of their danwei. Results show that the financial situation of the danwei is one of the most important determinants of earnings in today's urban China. Furthermore, the importance of danwei profitability does not vary by city or by employment sector.


* Paper presented at the International Conference on Chinese Society and China Studies, 26–27 May 2007, Nanjing, China. The research is supported by a research grant from the National Science Foundation, a Guggenheim Fellowship from the John Simon Guggenheim Memorial Foundation, and a Fogarty grant for international research from the National Institute of Child Health and Development. We thank Meichu Chen for her research assistance and Miranda Brown, Cindy Glovinsky, James Lee and Xi Song for their comments and suggestions on earlier drafts.