The purpose of this paper is to study China’s income inequality under rapid economic growth. Does the relationship between economic growth and income inequality in China follow the Kuznets hypothesis? What is the main cause and trend of China’s income inequality? We use data which covers the period 1980-2005 to analyze the overall inequality, and data covering the period 1980-2002 to analyze the inequality inside rural and urban areas. The derived results doubt the validity of Kuznets hypothesis on explaining the relationship between economic growth and income inequality in China. Also we derive the trend of China’s increased income inequality and find that the urban-rural income disparity is the main cause of China’s income inequality.