Using detailed Chinese manufacturing firm production and trade data from 2000 to 2006,this study finds that offshoring significantly increases firms\' average wages.First,using the quasi-natural experiment of China\'s accession to the World Trade Organization,we investigate how a reduction in offshoring costs affects the manufacturing firm\'s wages and find that a productivity effect and a job-relocation effect are two possible channels.Second,the dynamic decomposition of industry-level wages indicates that the within-firm effect is 0.547,accounting for 31.5 percent of the total variation.Finally,a Mincer-type regression shows that offshoring also increases within-firm skill premiums.Our findings have strong implications for the government related to framing appropriate industrial policies to raise wages and reduce income inequality.