An examination of wage determination in China’s rural industrial sector

Under traditional Chinese socialist ideology, labour is not considered as a commodity, and wages are not viewed as the price of labour. Market oriented economic reform initiated in the late 1970s, however, has brought some changes to this politically sensitive area—pricing and allocation of labour, especially in the rural industrial sector, are now much more sensitive to market pressures. This paper surveys the performance of labour markets in China's rural industrial sector after 10 years of economic reform. It examines whether conventional models of wage determination, modified to reflect the peculiar circumstances of the Chinese rural labour market, can be used to explain variations in wages in this sector of China. It is found that after only a decade of change, the pattern of wage determination in rural China has many parallels with wage determination in Western countries.