The year 2008 marked the 30th anniversary of China's beginning on its path of economic transformation. During the past three decades, a series of reform policies have been carried out to liberalize the economy and attract foreign investments. Rapid economic growth is accompanied by rising inequality. The Gini Coefficient of China increased from 0.23 in 1980 to 0.47 in 2005, according to official statistics (NBS). This disequalizing trend coincides with the initial stage of the debated Kuznets curve in which inequality of income distribution first increases during urbanization because of the difference between returns to industries and agriculture; then decreases as a result of the spill-over effect of macroeconomic growth. Question remains whether China's inequality has reached the top of the U-curve and started the down-sloping trend of inequality or has yet to experience more acute inequality.

This paper chiefly focuses on urban-rural inequality, especially urban-rural income inequality in China from 2002 to 2008, a recent time period that has been relatively less researched, with regard to intra urban and intra rural inequality, to analyze the trend of China's inequality. It also addresses emerging factors that can potentially reshape China's landscape of inequality such as rural-to-urban migration and policy responses.