Rural industrialization has been a dominant factor responsible for Chi
na's rapid economic growth over the last 18 years, but it has been acc
ompanied by increased inter-regional income inequality. Using the most
recent rural income data and two alternative Gini coefficient decompo
sition methods, this study finds that income inequality, especially in
ter-regional income inequality increased significantly in the period 1
986-92. More than half of national income inequality was due to its in
ter-provincial component, and three quarters of inter-provincial inequ
ality was due to its inter-zonal component. Uneven development of town
ship and village enterprises has been a major cause of increased regio
nal income inequality.