County economies form a distinctive, integrated regional economic structure. Their growth is shaped by specific social and historical conditions, and it influences many aspects of wider economic and social development. In China’s modernisation process, they have always played a vital role. The 2024 Central Economic Work Conference placed strong emphasis on vigorously developing county economies.

County economies are a crucial link in the national economic cycle. This cycle relies on the smooth flow and optimal allocation of resources between urban and rural areas, along with greater connectivity and balance, creating a complementary, coordinated economic whole. As basic units of the national economy, county economies encompass primary, secondary and tertiary industries, spanning production, distribution, exchange and consumption. They are both the meeting point of urban and rural economies and a form of regional economy with distinct local characteristics.

Key drivers of growth

The level of development in county economies directly affects the national economic growth. Developing county economies in line with local conditions and integrating urban and rural economies are essential for breaking down the urban-rural divide, tapping into domestic demand within counties, and expanding the space for China’s domestic economic circulation.

They are set to follow the strategy of high-quality development. In the past, county economies relied on resource consumption and low-cost labour to achieve large-scale growth, shifting from a purely agricultural economy to a diversified one. Today, with labour outflow, tighter resource and environmental constraints, and growing external competition, some counties face industrial decline or even hollowing out. Traditional extensive growth models are no longer sustainable. Having built up a certain scale, many counties now have the foundation to transition to high-quality growth, focusing on both qualitative improvement and reasonable quantitative expansion.

New opportunities are emerging. Institutional innovation in urban-rural integration, technological breakthroughs, and adjustments to productive capacity in an open economy have created favourable conditions for upgrading county economies.?

In particular, advances in information and transportation technologies have shortened distances, driving the continuous evolution of urban and rural production, innovation, and lifestyles. This has profoundly altered the flow and allocation of factors between urban and rural areas, as well as the connections between large- and medium-sized cities and counties. In such conditions, some counties can integrate into regional development strategies by embracing industrial relocation.?

In addition, the accelerated development of digital and green technologies, along with their in-depth application in production, processing, distribution, consumption, and social service management, has driven the transformation and upgrading of traditional county industries, fostering numerous new industries and business models.

The prosperity of county economies is closely tied to people’s well-being and social vitality. Where county economies are strong, living standards rise, and communities thrive; where they lag, incomes grow slowly, and vitality fades. Around half of China’s population lives in counties, mostly in rural areas. Developing county economies inherently supports the goal of increasing prosperity. By building robust local industries, more people can share in the benefits of development, creating a virtuous cycle of thriving businesses, stronger counties and wealthier residents.

Harnessing local potential

In essence, county economies should be shaped by their distinctive characteristics. Guided by market demand, development should align with local strengths to create a diverse, complementary and competitive economic landscape.

This entails cultivating leading industries with lasting market appeal. Counties rich in agricultural resources should focus on distinctive local produce, farming and food industries. Those with a manufacturing base should enhance industrial platforms, integrate into regional production networks, and build niche manufacturing clusters. Tourism-rich counties must balance preservation with development, combining tourism with agriculture, culture and technology. Counties near major cities or transport hubs can take advantage of their location to attract industrial relocation and drive transformation.

Innovative allocation of urban-rural resources is essential. Economic quality depends on the quality of production factors. Removing barriers to encourage equal exchanges and two-way flow of resources between urban and rural areas will boost efficiency and upgrade industrial, supply and value chains. Establishing unified markets for factors of production and channelling urban resources into rural areas will revitalise local industries.

Counties must also strengthen their capacity for industrial and technological innovation. While original innovation may be beyond the immediate reach of some, they can link with more developed areas through joint innovation platforms, shared facilities and collaborative projects, raising local technological capabilities. Where feasible, counties should support leading enterprises in building shared technology platforms that serve entire industry chains. Western counties can enhance innovation by cooperating with eastern regions.

Finally, improving industrialisation capacity and supporting services is key. The level of a county’s economic development is closely related to its overall capacity. Strengthening commercial systems and expanding industrial parks and clusters will create better conditions for growth.?

It is also important to ensure a rational distribution of industries between urban and rural areas. Large-scale, highly industrialised projects with high supporting infrastructure costs should be concentrated in county-level industrial parks, while industries that directly support planting and livestock activities – such as agricultural processing, e-commerce, warehousing, and cold-chain logistics – should be located in central village hubs.

China’s county economies are entering a new stage of high-quality growth, driven by industrial specialisation, digital transformation, and targeted policy support. An increasing number of successful cases reveal the key to upgrading China’s county economy: promoting industrial transformation through technological innovation and stimulating regional momentum through urban-rural integration.?

The evolution of China’s county economies demonstrates that it is entirely possible for a county to progress from a supporting role in national industrial chains to becoming a technological leader in its own right.

The author is?Research Fellow with Chinese Academy of Macroeconomic Research.