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Purpose – The purpose of this paper is to chart the sharp rise of informal employment in urban China in the last decade. It investigates the role of labour market regulations in shaping employment relations for those engaged in this form of employment and their employment outcome. It also examines various forms of organization and representation of these workers and the extent to which these mechanisms meet their needs. Design/methodology/approach – This paper draws on secondary and first-hand empirical data. The secondary data come mainly from media sources and academic publications in China. The empirical data from interviews that the author has conducted with the labour authorities, trade union officials, workers, senior managers and owner CEOs of private firms in several cities. Findings – The paper concludes that the inadequacy of the function of employment agencies, the absence of a functioning social security system for workers in informal employment, and the lack of effective enforcement of employment-related regulations mean that the majority of the growing force of workers in this category will continue to be under-protected and disadvantaged. Research limitations/implications – This paper draws information from secondary data and a small number of interviews with key stakeholders in employment relations. Future research should conduct a larger study focusing on the views and experience of workers in the informal sector. Practical implications – This study reveals some skills gaps and training needs for trade union officials. It also brings to the policy makers' attention some loopholes in the labour regulations and their implementation. Social implications – The paper argues that providing decent employment conditions and work environment remains a key challenge to all concerned but is crucial to the well-being of workers and their families. Originality/value – The paper examines the efficacy of labour regulations in protecting workers in the informal sector in China by investigating the roles of different institutional actors. It adopts a relational and institutional approach to study the issue. [ABSTRACT FROM AUTHOR]