The purpose of this paper is to improve our understanding of the role of the non-farm rural economy in assisting the rural reconstruction of the Balkans (specifically, Albania, Bosnia-Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania). The rural diversification, migration, employment, poverty and policy implications for this in terms of economic development and reconstruction as part of an integrated rural development strategy are crucial to both appropriate institutional and policy developments in the Balkans. We compare the Balkan States to China's Township and Village Enterprises (TVEs) because recent studies suggest that the rural non-farm economy (RNFE) may provide an important and dynamic contribution to economic growth, whether linked to the farm economy or not. While diversification into non-farm enterprise activities may provide important income smoothing and risk management strategies to rural households that are also involved in agriculture, enterprise activities located in rural towns and villages in China have eclipsed agricultural activities in terms of output and income. This paper examines the role that the RNFE may play in the development and reconstruction of the Balkan States, and seeks to identify factors from the successful Chinese TVE experience that are replicable to the Balkans. Recommendations are made concerning the policy and institutional environment that can best foster the growth of the RNFE, and the role of local government in supporting rural enterprise development
