The economic reforms of the late 1970s in China have raised general living standards particularly in the coastal urban areas. At the same time, however, they have increased unemployment and widened inequalities. This article examines these issues in Guangzhou, one of the cities where market principles dominate, by looking at workers' actual living standards as well as how they perceive them. Clearly workers in private and semi-private industries have bene fited from the economic reforms while employees of state owned industries feel betrayed and left behind. This has both social and political implications.