"Is it perhaps for the reason that some incapable provincial officials want to protect their position by keeping things the way they are?"

Indeed, that would definitely be one of the reasons. I once worked in the poorest county in China (at the time - don't know if that status has changed). There were three FT's in the main city of that county, and having foreign teachers there was a new thing. The school was quite old. No heat in the classrooms. I'll never forget teaching my classes throughout the winter while wearing coat, hat, scarf and gloves. Oddly enough, though, the year I spent there was the most rewarding of all the years I spent in China. All the teachers and the administrative staff were incredibly kind and helpful. The principal often gifted me with red wine and cigarettes, or took me out to dinner or on local excursions. I think what really made the difference was that they, the people who worked at that middle school, were all local people who had either stayed there or returned to their roots. These days, though I really don't have a great deal of interest in teaching in the classroom anymore, I think a lot about returning there - that's a testament to the kind of impact it had on me. (Pardon the digression.)

The city was developing rather quickly, but the outlying villages were not developing hardly at all. Turns out that the money allocated for those areas never made it past the corrupt provincial officials in cohorts with the mayor. A sad but common tale. Disgusting, actually. I was fortunate enough to have the opportunity to spend time in some of those villages. Incredibly kind people, many of whom made there living by getting up before the sun and pedaling to the city to sell their wares. They know what's going on, though. They know because it's always been that way.

The central government seems to know that also, but seem powerless to stop it, even in light of their oft stated objective of a "harmonious society." (Thanks, by the way, Turnoi, for mentioning Mao's thoughts on the dichotomy between urban and rural.)