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From an administered labor system under central planning, the Chinese economy has moved towards a labor market. This book reviews the progress that has been made over two decades of urban economic reform. It analyzes the underlying political economy that has both induced and impeded reform, and examines the economic changes that have unleashed market forces. Based on frontier research using specially designed and collected survey data, the book documents the rising wage inequality, the greater rewards for skills, the growing wage segmentation based on labor immobility and profit-sharing, the emergence of serious urban unemployment, and the competition from the rising tide of rural migrants. China does not yet have a functioning labor market: the book concludes by examining the prospects for its creation.