We document a rapid increase in income inequality in China’s recent past, capitalizing on newly available survey data collected by several Chinese university survey organizations. By now, China’s income inequality not only surpasses that of the United States by a large margin but also ranks among the highest in the world, especially in comparison with countries with comparable or higher standards of living. We argue that China’s current high income inequality is significantly driven by structural factors attributable to the Chinese political system, the main structural determinants being the rural-urban divide and the regional variation in economic well-being.