Abstract: Income distribution acts upon the industrial structure through its effect on consumption and factor supply. The slow development of China' s service industry is mainly due to the widening income distribution gap and the sluggish growth of domestic demand. To avoid the "middleincome trap", China must accelerate the transformation of the mode of economic development, restructure traditional industries into modern manufacturing and service industries, and foster the growth of service economy. At present, a variety of measures should be taken to reduce inequality in income distribution, to release the potential of domestic demand, and to facilitate the transformation and upgrade of the industrial structure through the improvement of the consumption structure.

Key words: income distribution, income gap, industrial structure, industrial transformation