The fiscal transfer reform of 1994 played a significant negative role for the disparity of China, which is much more favorable to the rich provinces by unfair Tax Sharing System and Tax Return Systems. However, the fiscal transfer system was improved after the new century and more capital were transferred to the poor provinces and regions than before. The article investigates the sigma and beta provincial income disparity trend of China over 1995 to 2007 and the regional decomposition analysis is also represented. It is shown that China experienced a nationwide divergence during the mid 90s to the early 21st century but the provinces except three metropolises, Beijing, Tianjin and Shanghai, have turned to converge since 2003. By the decomposition analysis, the regional disparities should be attributed to the intra-regional disparities other than inter-regional disparities.
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