China’s industrial development has had profound impacts on its rural economy. While the resource flows between the urban industrial and rural agricultural sectors are well studied, little attention has been paid to the interactions of industrial and agricultural development within rural areas. Using a nationally representative panel data, we find a strongly significant association between rural industrial development and agricultural productivity. Further, we ascertain that, while rural enterprises do withdraw labor out of agriculture and dampen productivity, the productivity loss is negligible in comparison with land productivity improvement brought by added infrastructure capital financed through tax revenue from rural enterprises.