Open AccessDespite China’s economic achievements in the last two decades, the market reforms have also brought about a widening income gap, reduction in social welfare, and rising unemployment. These factors are responsible for the emergence of a large number of urban poor, primarily composed of laid-off workers, unemployment persons, retired labours and urban migrants. As a marginal group, they suffer from economic inadequacy as well as violation of civil rights. Consequently, the urban poor raise a heightened anger with the negative result of the accelerated institutional transition and government’s inability to respond to social problems. Thus conceived, this paper will attempt to (1) analyze the changing mechanisms for the new urban poverty stratum in China; (2) examine the effect of urban poverty on political protest and social upheavals; (3) examine the current policies and its deficits.