Financial deepening in development economics as well as political economy refers to the notion which encompasses an increase in financial assets, monetary aggregates and credit activity in relation to the overall economic activity as measured by GDP. The standard assumption which is attachted to the understanding of financial deepening perceives a decrease in income inequality as its obvious consequence due to easier access to rising liquidity. However, in the last three decades rising income inequality in most OECD countries as well as developing countries such as the PRC oppose the aforementioned assumption. In the more advanced stage of economic development, apart from financial deepening, emerges the phenomenon of financialization. The recent evolution of the Chinese financial system shows the presence of its most important defining features in the institutional framework design and key actors' strategies. On top of that, in the last three decades one can observe a falling share of wages as a proportion of GDP in the case of developed as well as developing countries. This is often seen by many observers as a result of policies which they characterize as neoliberal and which ought to be viewed as tightly interconnected with the aforementioned increase in income inequality. Nevertheless, this dissertation does not aim at the use and the analysis of the notion 'neoliberalism' in the case of China. Comparative political economy with a special emphasis on how financial institutions work and their impact on the acquisition and the preservation of political and economic power under the theoretical framework of historical institutionalism, as well as a heterodox approach to the analysis of monetary theory, represent a key theoretical framework to this dissertation. This dissertation aims to test three main and three auxilliary hypotheses. Three main hypotheses of this research claim that: the financial deepening of China's economy represents a factor that correlates with rising income inequality (HG1); that the close interconnectedness between political and financial elite significantly contributes to rising income inequality in China (HG2) and that a new alliance between the political and the broader defined economic elites defies the basic assumption of Seymour Lipset's modernization theory which posits that economic modernization bears the strong potential for democratization (HG3). On the other side, auxilliary hypotheses claim that there is a negative relationship between the wage share as a percentage of GDP (measure of functional income distribution) and the rising income inequality (HP1), that financial institutions represent an important source of income inequality with regard to their inherent modus operandi (credit money creation) (HP2) and that the China's autocratic political system also displays symptoms of financialization in the implementation of financial sector reforms (HP3).