Two representative surveys, relating to 1995 and 1999, are used to analyse the effect of enterprise profitability on wages in urban China. The labor market is still at a rudimentary stage and job mobility remains low, so that wage differences across firms are not necessarily ironed out by labor market competition. There is evidence that, standardising for worker characteristics, profitability raised wages substantially; and that this effect became stronger over time. Moreover, whereas in 1995...