NEW HAVEN: On the surface, China’s economy glitters. Yet the double-digit growth that entices investors from around the globe is only one of many symptoms of a troubling economic phenomenon that wreaks havoc with political decision-making. China has an overwhelming vigor, its teeming millions all scrambling for individual success with widespread anticipation of the upcoming Olympics and Expo. Clearly, China wants the tallest buildings, the biggest dam, the fastest train and the largest foreign-exchange reserves. Equally clear, China has less concern about mounting environmental degradation as well as income and gender imbalances. While accelerating rates of income and employment growth in recent decades have lifted 300 million Chinese out of poverty, the condition still persists for 200 million in the rural interior. The gap between the two Chinas, urban and rural, is palpable, growing and receiving increased attention. Indeed, China’s overall income distribution as measured by the Gini coefficient (perfect equality is 0, perfect inequality is 1) is fast approaching .6, the highest anywhere in the world, and a far cry from the .2 level, one of the lowest, at the time Deng Xiaoping introduced his market-oriented reforms in 1978. Much of this growing inequality is geographically based, with the coastal provinces enjoying high rates of growth and the interior lagging substantially behind. While the industrial construction “crane“ has become China’s “national bird,” life for 50 percent of the population – the farmers who don’t have medical coverage or assured pensions, who don’t own their land and are taxed in direct and indirect ways – remains harsh. In fact, farmers cultivate land on long-term leases, and governments could sell it out from under them. These local bodies can then use the proceeds, augmented by local bank credit, to continue investing at high rates, despite Beijing’s current efforts to cool the economy. The basic cause of these anomalies in a country that continues to call itself communist – and is currently engaged in an effort to enhance “social harmony” in the context of 10-percent-plus growth rates – is a particular type of Dutch Disease. The economic ailment acquired its name from the1960s natural-gas boom in the Netherlands and is generally defined as the impact of a raw-material export spurt, possibly along with related foreign-capital inflows, on strengthening the exchange rate. Such an appreciation of the currency implies a shift away from labor-intensive export sectors that are becoming less competitive internationally and toward domestic non-traded goods, also enhancing infl