This chapter addresses three issues that are central to understanding the effects of the transition in China from central planning to a more market-oriented economic system. First, what have been the consequences of the economic reforms for the distribution of income in urban areas? Second, what has happened to the incidence of urban poverty? Third, have government policies helped to diminish or accentu ate urban poverty and inequality? Answers to these questions are based upon a comparison of the two national sample surveys, conducted in 1988 and 1995, which form the main empirical basis for this book.