This work investigates the contribution of economic activity to Chinese early urbanization, through a case study of the lithic production at the Neolithic Taosi site in Shanxi, China (c. 2500-1900BCE). The analysis is based on information collected from fieldwork experiments with replicating stone tool manufacture. Lithic production played an important role in the urbanization at Taosi, which developed into the primary political, economic and ceremonial centre in the Linfen Basin. Due to its central position in the region, a high level of social complexity, and its spatial layout with a rammed-earth enclosure, Taosi represents a milestone in the process of early urbanism in ancient China.