This study analyses the process of rural industrialization in Jiangsu - one of China's most productive provinces with a population of over 65 million. Based on extensive fieldwork, it examines the growth of the rural non-agricultural sector, the consequences of its development, the problems faced by rural enterprises, and their prospects. In the late 1970s, China announced its intention to industrialize without significantly enlarging the population of its urban centres through rural-urban migration. Peasants were encouraged to remain in their native villages but were permitted to pursue activities other than farming - a policy which proved highly successful. By the 1980s, the rural non-agricultural sector was the most dynamic component of the Chinese economy. Almost totally market-orientated, it gives the economy a much-needed degree of flexibility and provides a competitive stimulus to the centrally-planned state sector. Its rapid growth has also helped to maintain the momentum in economic reform. The development of rural industry in Jiangsu and other parts of China strengthens the case of those who believe that China's post-1978 reform strategy has been both successful and unique in its approach.