The economical construction and development of China can't be separated from the development of rural economy.Due to appearance and development of rural enterprises,surplus labor force of rural areas was accepted, agricultural economy had been developed and farmers' income enhanced. The traditional agriculture had been reconstructed. The construction and development of small cities and towns are connected with the development of rural economy and accelerate the development of city economy. The construction of small cities and towns can have congregation effect and scale benefit. The industry structure of country will be optimized in whole, management cost will be cut down, energy consumption will be reduced, pollution will be lowered and labor productivity will be increased. In this paper, the importance of town construction in economic development of China is elaborated. The achievement and problem in town construction are summarized. A method of gradual advance for town development is put forward and the problems that must be handled in town development are pointed out.