Rural and urban education systems in China are compared in terms of funding, educational resources, living and learning environments, teacher quality, and students' chances of social mobility. Fundamental inequality exists between urban and rural schools. Differential treatment of two types of schools, "keypoint" and "ordinary," has resulted in unequal access and treatment for rural children. Keypoint schools are designated by the government and are given many privileges that other schools are not with respect to student and teacher selection and financial support. Graduates receive preferential treatment in higher education. This inequality does not result solely from geographical differences and imbalance in social and economic development, but is more the result of the fundamental structure of the Socialist institution, which supports the notion that the working class is the leading force in China, while the peasant class serves as subsidiary allies who merit inferior treatment. These inequalities cannot be corrected unless national educational goals change. There is a 17-item list of references. (SLD)