The major objective of this paper is to shed some light on the mechanism that generates interregional imbalances among communities in rural China. Central to this issue is the development of township and village enterprises (TVEs) because their presence is closely associated with the economic welfare of the people residing in rural communities. The spatial disparities are attributed to a variety of factors, including the less efficient use of TVE resources in poor areas, the decentralized fiscal system, and agglomeration economies. In short, the socialist regime of self-reliance that still lingers in China's rural society traps less advanced areas in poverty.
