This paper intends to examine what cause the rise of wage gaps in urban China
by using 1988, 1995, 1999 and 2002 CHIP urban household survey data. To this end, we
employ quantile regressions and parameterised counterfactual decomposition to single out the
factors that result in the enlargement of wage inequality and wage gap. The econometric
results could not reject Wu’s hypothesis that the high pay of the oligopoly SOEs gives rise to
the worsening of income inequality. Additionally, the results reveal that both the elevation of
workers’ education attainment and the change of educational pay structure brought about the
rise of wage inequality and wage gaps, whereas the variation of potential work experience
and pay structure in term of the experience led to the fall of wage inequality and wage gap.