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The rapid expansion of self-employment has accompanied the rise of a market economy in urban China. According to the National Bureau of Statistics of China, the state-owned enterprises' share of the country's gross domestic product has declined from over 90 percent in 1978 to below 50 percent in 2005. Urban entrepreneurship and self-employment is an emerging force that is shaping the economic and physical form of Chinese cities but is understudied in the academic literature. Using the 2007 Chinese Household Income Project ( CHIP) data, we investigate the rate and scale of urban entrepreneurship across Chinese cities, as well as the characteristics and earnings associated with self-employment as compared to wage employment. We pay particular attention to the financial capital, human capital, and social capital factors underlying entrepreneurial entry and distinguish between 'necessity entrepreneurs' and 'opportunity entrepreneurs' and their respective socioeconomic characteristics. [ABSTRACT FROM AUTHOR]