Abstract: China is the second largest recipient of FDI inflows nowadays, a preferred destiny for the global investors after USA. In study, FDI is said to be creating a favored local group depending on skill intensities, it requires and if the investment is technologically advanced than the host country’s state, then this can lead to greater income disparity. China is evidenced with a spectacularly huge FDI inflow in the past decade along with increasing income inequality. This study attempts to analyze, whether FDI inflows in China has any role in increasing inequality over time. Finding of this study is quite clear: foreign funded industries in China are enjoying persistently higher wages than the national averages and the higher the skilled intensive foreign investment is the higher is the wages.