In contrast to the situation in western countries at the time of their industrialization, it has been and still is impossible for rural labour in China to move to the urban sector for employment. For this and other reasons, including shortage of arable land and population growth, lack of employment opportunities continues to be a serious problem in rural China. This article discusses the development of township enterprise in rural areas and its role in the alleviation of China's rural employment problem. It is suggested that the further development of township enterprise should be an important element of China's development strategy.