Over the past two decades, China has experienced rapid economic growth, which has also led to increased social and economic inequality. A nation that once operated under the principle of egalitarianism, China now struggles with a level of inequality that has surpassed most of its East Asian neighbors. In the 1980s, poverty was a problem limited mainly to rural areas, but recently it has also spread to urban areas. Since the mid-1990s, urban poverty has grown at a very rapid pace under the influence of globalization (Fulong, Webster, and Yuting 5). China's economic restructuring contributes enormously to this phenomenon. The Chinese government officially recognized urban poverty as a problem in 2001 through a report prepared by the State Council (Fulong, Webster, and Yuting 15). The report was also a recognition that the nation faced a new challenge in implementing social policies. Urban poverty arises from changes in institutional patterns of crucial consumption areas such as housing, healthcare, and education, combined with the loss of urban space rights that occur during land appropriation. Despite the economic progress that China continues to experience, some negative externalities have emerged. The income gap continues to widen, there is a reduction in social welfare, and unemployment is increasing (Fulong, Webster, and Yuting 21). There has been an increase in the urban poor, the main composition of which consists of unemployed individuals, laid-off workers, urban migrants and retired workers. The violation of their civil rights and the government's inability to remedy social problems in their areas further exacerbates their economic inadequacy (Fei 17). The urban poor in China are classified into two: or...... half of paper. ..... they will fight fiercely against an increase in their contribution. China's leadership faces an enormous challenge in how to lead the nation in the transition from an investment- and export-driven economy to a consumption-driven economy. The commitment to shift from an emphasis on GDP growth to people-oriented growth requires the development of targeted policies that take into account the needs of all people, both rural and urban. It should establish a resource framework focused on social welfare programs such as healthcare and education that will empower the urban poor and reduce inequality. Beijing should work to ensure that the implementation of FP12 proceeds successfully; so far, its approach to stimulating consumption has been quite successful. The transformative nature of this plan could be key to addressing China's rapidly growing problem of urban poverty and inequality.