This paper examines the widening urban-rural income gap inChina which has existed since 1985, and its implications for the Chinese economy. I argue that the decliningfiscal capacity of the central government and the ensuing central-local competition for revenues, a systematic urban bias in Chinesefinancial mechanisms, and the structural vulnerability of small peasant farmers in a transitional economy have all contributed to the growing disparity between urban and rural residents. The consequences of this growing urbanrural gap have begun to haunt the Chinese economy as it struggles to readjust fiom export-oriented growth to the boost of domestic demand. Cet article examine l'tcart deplus en plus grand qui existe, depuis 1985, entre les revenus des habitants des milieux urbains et ruraux de la Chine et analyse les rkpercussions de ce fosst kconomique sur l'tconomie chinoise. L'auteur constate que le dkclin de la capacitt fiscale du gouvernement central, la umcurrence qui s'ensuit en ce qui concerne les revenus, l'impamalitt systhatique dans les mtcanismes de financement et la vulntrabilitt des petitspaysans dans une tconomie en pleine transition ont contribut d tlargir le fosst entre les habitants des milieux urbains et ruraux Les constquences de cette disparitt commencent d hanter la Chine d l'heure oir le pays tente de redresser son konomie de sa croissance orient& vers les exportations et de la diriger vers la demande inttrieure. Qunjian Tian received his PhD from Cornell University and is assistant professor of government at Connecticut College, New London, Connecticut.Special thanks to Paul Pickwitze, Guang Lei and Wang Liping for their comments on an earlier version of this paper. I also want to thank two anonymous reviewers for their detailed comments. The views expressed here are solely mine.