China's economy has made tremendous progress with its reforms, but one day it will have to face the dangerous side effects of its widening income gap.

China's income gap is widening and reaching alarming levels. That's according to the Gini Coefficient, a commonly used index to gauge the inequality of income distribution.

The Gini Coefficient is valued between 0 and 1. The bigger the number, the wider the income gap. In the beginning of China's reforms, it had an index of 0.29, representing an equal income distribution. In the early 90's China's index rose past 0.4, which translates into a wide income gap. In 2006, it jumped to 0.496, which means a huge income gap. If China's index climbs to 0.6, it would bring social chaos.

China began its economic reforms to address an over-emphasis on equality rather than efficiency during the Mao-era. But now the pendulum has swung too far, resulting in a very unequal distribution of wealth.

There is also a widening gap between the elite and those in society's lower echelons. The elites control China's political, economic and cultural resources.

Those in society's lower echelon are often exploited. These include  a large population of poor farmers, laborers and those who live in remote areas. This unequal distribution of power also has let the rich get richer, while the poor just get poorer.

What's more, China's rampant corruption and social unrest has increased tension between socioeconomic groups. These tensions probably will not worsen while the economy is growing. But once the economy slows down, China will have to face the host of social problems that are coming from the huge power and income divide between its peoples.