China has approached a turning point from which its income gap will narrow, said a report released by the Research Center of Labor Market at the Beijing Normal University on November 17, 2012.

Along with progress in market-oriented reforms, China's income gap has continually widened, with the rising rate of return to educational investment as a major driving force, said the center's Director Lai Desheng. In recent years, however, the trend has been gradually reversed as China arrives at the turning point on the Kuznets curve, which represents the hypnosis that as a country develops, market forces at first increases inequality and then decreases it after a certain average salary is attained.

China's gaping income divide has attracted attention from all walks of life, Lai said, adding that public concern remains locked on future developments.

"Some believe the country's income gap will continue to widen. Others think that while the gap remains wide, the pace of its expansion has slowed down. We are of the view that China may face a turning point in reversing income disparities, which is, nevertheless, not stable and demands further policy support," Lai said.

The conclusion is based on the fact that the salaries of middle- and low-income groups grows faster than that of people with a high income and the wealth gap between urban and rural areas is being bridged, he said. The ratio of urban resident income to rural resident income declined for two consecutive years to 3.13 in 2011 from 3.23 in 2012 and 3.33 in 2009. Moreover, China's urbanization rate has exceeded 50 percent. In the future, driven jointly by continuing urbanization and the narrowing urban-rural income gap, overall income disparities in society will hopefully be mitigated, Lai said.

One of the reasons for the positive change is that worker wages have risen rapidly given China's demographic transition and the advent of the Lewis turning point, at which excess labor in the subsistence sector is fully absorbed into the modern sector, Lai said. As worker education improves, income disparities among those with different educational backgrounds have been steadily reduced. While the government switches to market-based policies to support agriculture, farmers have also become more capable of making money. Changes in the wealth redistribution policy in favor of low-income groups have also begun to make a difference, Lai added.