left millions of children traumatized due to parents who have left them to be raised by other family members, as the Chinese government does not allow parents who move to urban areas to take their children with them. Lewis pointed out that, starting from a situation of 80% rural, the initial shift of some from low-productivity agriculture to high productivity urban employment is disequalizing. If the flow continues until the population is more than 50% urban, however, further migration is equalizing. This pattern is very evident in the history of the U.S., with inequality rising during the rapid industrialization period from 1870 to 1920, and then declining thereafter. So, the same market forces that have produced the rapid growth in China predictably led to higher inequality. But it is important to note that in China there are a number of government policies that exacerbate this tendency toward higher inequality and restrict some of the potential mechanisms that would normally lead to an eventual decline in inequality. Rural-urban divide Much of the increase in inequality in China can be attributed to the widening rural-urban divide, particularly the differentials in rural-urban income. A household survey conducted in 1995 showed that the rural-urban income gap accounted for 35% of the overall inequality in China. In 2009, according to the China's National Bureau of Statistics, the urban per capita annual income at US$2,525 was approximately three times that of the rural per capita annual income. This was the widest income gap recorded in China since 1978. Urban-based economic policies adopted by the government contribute to the income disparities. This is also known as the ‘artificial’ result of the rural-urban divide. In terms of the share of investments allotted by the state, urban areas were given a larger proportion when compared with rural areas. In the period 1986–1992, investments to urban state-owned enterprises (SOE) accounted for more than 25% of the total government budget. On the other hand, less than 10% of the government budget was allocated to investments in the rural economy in the same period by the state despite the fact that about 73-76% of the total population lived in the rural areas. However, the burden of the inflation caused by the fiscal expansion, which at that time was at a level of approximately 8.5%, was shared by all including the rural population. Such biased allocation of government finances to the urban sector