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China has achieved high economic growth for over 20 years but still has a sizeable number of people living in poverty. Using large household survey data, this paper attempts to present a comprehensive picture and identify the main determinants of poverty in both the urban and rural sectors. It concludes that despite rising urban poverty in recent years, rural poverty is still predominant in China. The slow progress in reducing poverty has been caused by rising inequality, particularly the urban–rural divide and interregional inequality. In sharp contrast to the government’s optimism in poverty reduction, this paper shows that poverty in China is still serious and has become increasingly more difficult to reduce. Although China may easily meet the international development target of reducing poverty by half from 1990 to 2015, the battle against poverty is far from over, even