Objectives. This article analyzes the impact of the new form of economic segmentation, which emerged in urban China during the market transition, on gender segregation and earnings differentials.

Methods. I compare both over-time and across-city change in gender segregation, and use a series of multi-level cross-classified models based on data at three levels: a 1995 national sample of individual workers, industry-sector data for 1990 and 1995, and city-level data for 1995.

Results. Gender segregation by ownership sector has declined over time now that the state sector has become differentiated and its relative economic advantages wanes. Both earnings differentiation and gender segregation among industries have increased with marketization. In the most marketized cities, the earnings of workers of both sexes in jobs with high rates of female entry are penalized, indicating that marketization exacerbated the negative effect of job feminization on earnings.

Conclusions. These findings lend support for the “queuing” perspective that a decline in jobs' relative wages leads to feminization. The making of the Chinese market economy has created a new set of institutional arrangements, which includes that between job feminization and wages.