In most parts of the developing world, the urbanization process has been dominated by rural–urban migration and the growth of existing cities. However, case-studies in China’s Fujian Province suggest that this process can also be achieved mainly by in situ transformation in rural areas. Such in situ transformation of rural areas has been driven mainly by two forces, the development of township and village enterprises (TVEs) and the inflow of foreign investment; and facilitated by the relevant policies adopted by the Chinese government since 1978. The former has been very effective in the transformation of rural employment structure, while the latter has brought many physical changes to the previously rural landscape. Being mutually complementary, these two ways of rural transformation have not only benefited and urbanized the rural areas, but kept many farmers in their hometowns, replacing the dominant role of rural–urban migration and the growth of existing cities in the urbanization process.