China's impressive growth has been accompanied by high inequality and a wide rural–urban divide. This paper identifies and examines some of the major dimensions of this divide: income, consumption, education, employment, health care, pensions, access to public services, and the environment. The paper attributes the main causes of the divide to China's urban‐biased development strategies and the resulting lack of social provision of public goods in rural areas. It also highlights the severe and multidimensional constraints on the Chinese peasantry and argues that increased equality and efficiency can now be pursued simultaneously.