China has long earned acclaim for economic growth that has lifted hundreds of millions out of poverty. But even as it became the world’s second-biggest economy, final victory over intractable extreme poverty proved a long march. About 3,000 counties still fell into this category in 2012. The announcement that China has raised the last 832 of them out of their dire plight, the final step towards proclaiming the end of poverty , is therefore a truly great achievement. It also meets a deadline of the end of this year, ahead of next year’s 100th anniversary of the Communist Party. But the country faces a new challenge in raising the floor of living standards across the nation. Perversely, while eradicating poverty, it has experienced a growing wealth gap. That is the next obstacle to be overcome as the Communist Party aims at President Xi Jinping’s goal of doubling the size of China’s economy and building a stronger and more prosperous nation by 2035. China’s claim that all 3,000 counties designated as poor in 2012 have now been lifted out of poverty is based on average income. But critics argue the announcement hides a sharp increase in the income gap between urban and rural areas. Beijing has not gone as far as to announce a complete eradication of poverty, but any problems now are attributed to specific villages or households. “The objective task of nationwide poverty alleviation has been completed,” state-run broadcaster CCTV said. However, following the Central Committee’s fifth plenum late last month, Xi said the country must distribute the fruits of development more fairly. China’s rapid growth in the past four decades may have lifted living standards – but not evenly. It has also coincided with a sharp widening of inequality defined by a gulf between rich and poor. Reining in inequality and closing a potentially destabilising wealth gap calls for the expansion of the middle class, or middle-income sector of the economy and expanded social services coverage. According to economists, that means reform of tax, welfare and labour policies if China is to achieve the goal of “common prosperity” for all by 2035. Moreover, middle-class consumers are key to Beijing’s dual circulation economic strategy, under which domestic production and consumption play a greater role in growth. It says something about the scale of the task that according to Premier Li Keqiang last May, 600 million of China’s 1.4 billion population still earned an average monthly income of 1,000 yuan (HK$1,180) or less. This is reflected in the disposable income gap between residents in Shanghai and the northwestern Xinjiang province, which nearly doubled to 24,376 yuan in the first three quarters this year from 13,506 yuan in 2013.