The world's economies have changed with the advent of globalization, and China is among the most impressive examples of change. China has undergone a rapid growth in economic development since opening its markets in the late 20th century. However, with this achievement, there has been an increase in the concern over income disparity. Two studies are helpful to understand the relationship between globalization and the income gap in China: Wei and Wu's study on the relationship between the degree of trade openness and the income gap, and the study of regional inequalities by Wan and his colleagues.

The true starting point of China's embracing the world is 1978 when Deng Xiaoping launched the “Reform and Opening Up” policy. This was a key reform designed to modernize the Chinese economy by liberalizing the market and increasing China's international links. The most important step taken was the establishment of SEZs (Special Economic Zones) such as Shenzhen to draw foreign capital and export goods. Since China became a member of the World Trade Organization (WTO) in 2001, it has continued to prepare itself for the international market. These changes led to raising more than 800 million people out of extreme poverty and spurred off tremendous GDP growth. However, this was not enough to reduce income disparities – particularly between urban and rural areas and among regions.

Wei and Wu (2001) examined some 100 Chinese cities over the period 1988-1993 and how the level of trade openness influenced urban-rural income differentials. They developed the concept of the income ratio between cities and urban areas and linked it to the degree to which the cities are open to international trade. Interestingly, their research revealed that the cities more connected with the global markets had a reduction in the gap between urban and rural income. This goes against the widely held assumption that globalization always exacerbates inequality.  In turn, Wan and his fellow researchers (2006) looked at the effects of globalization on regional income disparities in China. They applied a technique called Shapley value decomposition to ascertain the effects of such factors as trade and foreign investment on regional differences. Their findings revealed that globalization had a significant contribution to the increased levels of regional income inequality, and globalization had become increasingly powerful over time. Domestic factors such as local investment were generally more important, but globalization was also important. They also noted that other reforms such as privatisation, alongside education and urban development disparities, advanced these regional disparities. Globalization has a complex effect: while it can lead to economic growth, it can also exacerbate inequalities if not properly managed, their study finds.

Facing these problems, China made several moves with policies for fairer development. The Western Development Strategy that was initiated in 2000 was one such major initiative. The plan was to accelerate development in China's less developed western regions, focusing on infrastructure, education and healthcare. These areas were connected to the more prosperous coastal cities by newly built highways, railroads, and energy projects. This approach helped to improve the prospects for development in many underdeveloped regions, although income disparities still remain.

A key step was the promotion of foreign investment to be more balanced throughout the country. Most foreign business organizations are located along the coast originally due to the infrastructure available and the access to the international markets. To redress this, government offered incentives such as low taxes, low land prices and accelerated investment approvals to companies investing away from the coast. One of the well-known examples is a factory by Foxconn that made "iPhone City" in Zhengzhou known, which has brought thousands of jobs to a struggling region. China began to fill some of the regional income disparities experienced by globalisation by directing investment into the non-coastal cities.

Last but not least, China started to reform its longstanding Hukou system, which had been binding people to the place of their birth with regard to services, such as education and health care. This system made it extremely difficult for the rural migrants to be part of urban life, as they were restricted to low-paying jobs and the income gap was growing. Aware of this, the Government initiated reforms in the cities such as Chengdu and Chongqing, so that migrants can get more access to urban public services. Later, the 13th Five-Year Plan called for a 'people-centred' urbanization strategy to more equitably include millions of rural migrants in urban development. These reforms led to a more positive effect on the lives of many migrant workers and reduced the rural-urban income gap.

Overall, China's approach to globalization illustrates that well-designed targeted policies can limit some of the adverse impacts of globalization. We see that growth and rising inequality are not inevitable, through the building of infrastructure in poor areas, the better investment habits that are being promoted, and the reform of old social systems. To be sure, globalization poses new economic challenges, but good governance and planning can ensure the gains of globalization are more widely distributed. China is still working on improving these strategies; other nations suffering from similar problems in a globalized world have a lot to learn.