Supporting Article

Rural Urbanization in China

The phrase “rural urbanization,” at first glance, appears to be an oxymoron.  Yet it is an apt phrase to describe what has been happening in China, especially in the eastern regions, over the past two decades. A huge and growing surplus in the agricultural labor force has created a need for non-agricultural jobs in rural areas. To meet this need, and to protect her large cities from being overwhelmed by large-scale migration from rural areas, China has been developing industry in rural areas. This has led to a new way of urbanization in which farmers are urbanizing rural areas instead of migrating to the large cities of China.[1]

 A 1996 census revealed that while China has a rural labor force of 452 million, only 250 million are actually engaged in farm work. What about the rest? Some 45-80 million rural residents actually work in the cities, while the rest (30% of the rural labor force) are employed by township and village enterprises (TVEs).[2]

TVEs are a new form of corporate organization blending private enterprise with community ownership. Township and Village Enterprises may be described as business units that belong to the residents of the rural communities where they are typically located. The name comes from the fact that rural communities in China are classified into two types, townships (xiangban) or villages (cunban), depending upon size. Townships have about 3,500 households while villages have around 200. At the end of 1992, there were 48,200 town- ships and 806,000 villages in China. On average, each township has 8.2 township enterprises with 66 employees each, and each village has 1.4 village enterprises with 23 employees each.[3] There are around 20 million TVEs in China.[4]

The workforce in most TVEs is made up of farmers who have “left the land but not the rural area, entering the factory but not the city.”[5] While these enterprises are not state-owned, neither are they privately owned. Ronald McKinnon, a Stanford economist, describes them as “a form of corporate organization that hasn’t been created before.”[6] They are controlled by local government units (counties, townships, villages), and their managers are answerable to local officials and investors (often the same people).

This local control and accountability to investors is what distinguishes TVEs from State Owned Enterprises (SOEs). A significant portion of the revenue of local governments depends upon them, so the bureaucrats in charge are highly motivated to keep them profitable. While the central government, due to its control of the banking system, can bail out failing SOEs, no such safety net exists for TVEs. They are governed by hard budget constraints and must produce or perish![7]

Many TVEs are export-oriented, and an increasing number are seeking foreign investors as joint-venture partners. This, of course, represents a good opportunity for those who have a desire to serve China to get involved in local communities. Those considering such involvement should proceed with caution, however, as there are many pitfalls. TVEs can easily go bankrupt, and almost no laws or regulations exist to guide their development. While the central government is trying to change this,[8] the sheer number of TVEs, coupled with their essentially local character, will continue to make for a chaotic situation for years to come.

While the growth rate of TVEs over the past 20 years has been phenomenal, there are some indications that it is now leveling off, and even declining. Many carry crushing debt loads, and others suffer from narrow product lines and poor management. The temptation is always present for the local governments that control these enterprises to treat them as cash cows, using profits to finance municipal budgets instead of reinvesting or reducing debt.[9]

Still, opportunities abound, especially in central and western China. The vast majority of TVEs are currently located in eastern China, where rural areas have better infrastructure and access to markets. As of 1995, only four percent of the total production  by TVEs came from western China, compared to 33 percent from central China and 63 percent in eastern China.[10] Since then, many township enterprises in eastern China have begun to focus their interest on central and western regions.

The development of more and better TVEs in central and western China is also seen as a highly desirable goal by the central government. The Chinese Embassy in the UK recently reported that the East-West Co-operation Programme, which was started in 1995 with the approval of the State Council, has, over the past five years, signed 30,000 contracts involving investment of 70 billion yuan (US$8.4 billion).[11]

This trend has important implications for the spread of the gospel in China. As the church is much stronger in eastern China than in central and western China, opportunities for Christians from the former to travel to the latter represent potential for expansion of the church. In addition, many of the poor rural areas in central and western China, that would be natural targets for the development of new TVEs, are home to unreached people groups. Recent reports indicate that Christians in China are catching the vision to take the gospel to the unreached peoples within the nation, and cooperative ventures focused on the development of TVEs could well be one key to turning this vision into reality.

Rural industrialization also represents a significant opportunity for expatriates desiring to serve the cause of Christ in China. Businesspeople, with funds and expertise to invest in existing TVEs throughout China, have the opportunity to develop relationships in communities that Jesus Christ can use to build His kingdom. Those who have the willingness and capacity to make a contribution to the development of TVEs in the rural areas of central and western China should, in like manner, find open doors to serve the cause of Christ among the needy peoples of these regions.


  1. ^ “Small town development and rural urbanization in China” Gabe T. Wang and Xiaobo Hu. Journal of Contemporary Asia v. 29, n. 1, 1999, pp. 76-94.
  2. ^ “Farm Demographics.” China Today. February 1999, pp. 10-11.
  3. ^ “Institutional Environment, Community Government, and Corporate Governance: Understanding China’s Township-Village Enterprises.” Jiahua Che and Yingyi Qian, pp. 1, 25.
  4. ^ Contemporary China. Alan Hunter and John Sexton. New York: St. Martin’s Press, 1999, p. 63.
  5. ^ Wang & Hu, loc cit.
  6. ^ “Down off the Farm,” Economist v. 325, n. 7787, p.11, Nov 28, 1992.
  7. ^ Loc. cit., p.12.
  8. ^ See “On Agriculture, Rural Economy” at <>.
  9. ^ “Municipal-run Firms Helped Build China; Now, They’re Faltering,” by Craig Smith. The Wall Street Journal, October 8, 1997.
  10. ^ “’Hey, Coolie’ – Local Migrant Labor” ICWA Letters. Institute of Current World Affairs, January 1999, p. 7.
  11. ^ <>
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Jim Nickel

Jim Nickel was vice president of ChinaSource from 2000 to 2004 and was involved in promoting work among the unreached Chinese peoples for many yearsView Full Bio