This article examines recent trends in inequality and poverty and the effects of
distributional policies in China. After a discussion of data and measurement
issues, we present evidence on national, as well as rural and urban, inequality
and poverty. We critically examine a selection of policies pursued during the
Hu–Wen decade that had explicit distributional objectives: the individual
income tax, the elimination of agricultural taxes and fees, minimum wage policies,
the relaxation of restrictions on rural–urban migration, the minimum living
standard guarantee programme, the “open up the west” development
strategy, and the development-oriented rural poverty reduction programme.
Despite these policies, income inequality in China increased substantially
from the mid-1990s through to 2008. Although inequality stabilized after
2008, the level of inequality remained moderately high by international standards.
The ongoing urban–rural income gap and rapid growth in income
from private assets and wealth have contributed to these trends in inequality.
Policies relaxing restrictions on rural–urban migration have moderated inequality.
Our review of selected distributional policies suggests that not all policy
measures have been equally effective in ameliorating inequality and poverty.