Informal housing and industrial developments in the so‐called urban villages have been key features of the recent Chinese urbanization. In this article we will examine the development of urban villages in one of the most dynamic Chinese cities — Shenzhen. The article first reviews the urbanization and migration process in the region and the emergence of urban villages. It then examines informal housing, commercial and industrial developments in these villages. We analyse the politics of village urbanization and highlight the important relationship between migration and informal village development. We emphasize the contribution made by urban villages in providing affordable housing and jobs for the low‐income population during the rapid urbanization and urge cautious consideration with regard to hasty and large‐scale redevelopment of these villages. We conclude that the development of urban villages is a very important part of the urbanization process.