This paper analyzes changes in the gender earnings gap in urban China over the period 1988-2004 using urban
household survey data. The mean female/male earnings ratio declined from 86.3% to 76.2%. Mainly
responsible for this diverging trend were rapid increases in returns to both observed and unobserved skills,
which accentuated the disadvantage associated with women's lower skill levels. The gender gap in observed
skills such as education narrowed over the study period, but did not close, and there is evidence that the gap in
unobserved skills widened considerably. Increased discrimination may also have served to widen the gender
earnings gap. Analyses by earnings percentile and by sub-period show that although the gap widened much
more at the lower end of the earnings distribution than at the upper end over the period as a whole, it widened
greatly at the upper end in the most recent years (2001-2004).