We employ a new method to estimate China's income distribution using publicly available interval summary statistics. We examine rural, urban, and overall income distributions from 1985 to 2001. We show how the distributions change directly, and we examine trends in inequality. Using an intertemporal decomposition of aggregate inequality, we determine that increases in inequality within rural and urban sectors and the growing rural-urban income gap have been equally responsible for the growth in overall inequality over the last two decades. However, the rural-urban gap has played an increasingly important role in recent years. We also show that the urban consumption inequality rose considerably.

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