Emerging as a non-commercial, grassroots alternative to the state-controlled publishing businesses, online literature in China has formalised based on the freemium business model and with the influx of capital. However, little is known about the informality in the formal market and their mutually shaping relationship. This article approaches online literature production in China as case study of the interconnection and interactions between the formal and informal in the wider context of the creative labour debate. It begins with an analysis of the inception of online literature in the context of Chinese literary system before unpacking the formalisation process. It then examines precarity associated with the informal labour, particularly the augmented precarity under the sway of capital. Then, it focuses on surrogate writing as a new form of informality arising from the formalised market, reveals the formality therein and its economic and socio-cultural implications including its impact on the formal market.