I wrote an article about record shops for an expat rag back in Fall '08. The info should still be relevant:
This new kid on the block (they opened shop on Aug 22) offers 15 square meters of avant-garde cinema, local music and free coffee.
No. 113-3 Nanluoguxiang
Located next to Hutong Pizza in Houhai, this is the place to pick up—gasp—genuine international CDs. Rockland, in addition to their massive selection of burned CDs with environmentally-friendly paper packaging—is also an agent for the Modern Sky and RHC record
No. 2 Nanguanfang Hutong
666 Rock Shop
Lovers of death and black metal, thrash and NWOBHM would do well to take a trip to this aptly-named hotbed of all things shred-worthy. You can even book your favorite CDs online.
No. 157 Gulou Donglu, Dongcheng
Free Sound Records
Located on the south end of the famed Xinjiekou Musical Instrument Street in Xicheng, Free Sound has been kicking out the jams since 2003. Their mission?
“To support original music, promote genuine discs and be the professional music shop.” Come here for their large selection of domestic rock and roll records.
No. 40 Di'annen Xidajie, Xicheng
Agent for Tofu, Xiaosheng, Pocket and Goddess of Mercy Records.
Check out their "Sunday Listening @ 798" program every Sunday afternoon: an independent music, sound and art exchange project that includes music performances, video screenings, lectures, recitations, teachings, workshops and artist talks from Beijing’s independent
music community. Free!
No. 2 Jiuxianqiao Lu, Chaoyang (Opposite Galleria Continua in 798 Art District)