Economic growth and income equality are the two primary objectives of governments across
the world. However, in the last three decades, while China has achieved successfully the
objective of fast economic growth, it has failed to achieve the objective of income equality. In
terms of growth in GDP and household income, China has achieved the best record in her
history. The GDP grew by nearly 10 percent, and household income in urban and rural areas
by 8 percent, between 1978 and 2012. By the end of 2012, the GDP per capita reached about
$5500, making China one of the upper-middle income countries. However, at the same time,
China, which was an egalitarian society 30 years ago, has been experiencing sharply
increasing income inequality since the beginning of the 1980s. This paper examines the
parallel changes in income inequality in the last three decades.