China has promulgated a series of policies including the Western Development Program, the Grain for Green Project, agricultural support policies and building a new countryside strategy to eliminate east-west differences and urban-rural disparities since the late 1990s. This paper gives a holistic examination on local responses to the four typical macro socio-economic development policies and their effects on rural system based on a case study of a mountainous village in southern Sichuan Province. The results showed that the policies have not moved the case study village from its historically marginal status. To some extent, its socio-economic situation might have been worsened by accelerated out- migration of the youth, loss of agricultural land due to afforestation and industrial plants, increased fire hazard due to afforestation and reforestation, increased environmental pollution due to industrial enterprises attracted to the village and a steep decline in agricultural production due to loss of and inefficient use of cultivated land. Factors causing local villages’ dilemmas include the nonuniformity of actors’ objectives, finiteness of villagers’ abilities, and the imperfect incentive and restraint mechanism for local government’s activities under existing policy framework composed of uncoordinated one-size-fits- all policies. We suggest that China’s rural policy in the new period should gradually shift from a sectoral to a place-based one, from top-down incentives to the development of bottom-up projects, and fully recognize the diversity of rural space, so as to lift localcapacities and make good use of the knowledge shared by different actors. Moreover, it is also necessary to integrate the various sectoral policies, and improve the interministerial and interdepartmental coordination of rural policies at regional and local levels. China has promulgated a series of policies including the Western Development Program, the Grain for Green Project, agricultural support policies and building a new countryside strategy to eliminate east-west differences and urban-rural disparities since the late 1990s. This paper gives a holistic examination on local responses to the four typical macro socio-economic development policies and their effects on rural system based on a case study of a mountainous village in southern Sichuan Province. The results showed that the policies have not moved the case study village from its historically marginal To some extent, its socio-economic situation might have been worsened by accelerated out-migration of the youth, loss of agricultural land due to afforestation and industrial plants, increased fire hazard due to afforestation and reforestation, increased environmental pollution due to industrial enterprises attracted to the village and a steep decline in agricultural production du e causing loss of and inefficient use of cultivated land. Factors causing local villages’ dilemmas include the nonuniformity of actors’ objectives, finiteness of villagers’ abilities, and the imperfect incentive and restraint mechanism for local government’s activities under existing policy framework composed of uncoordinated one -size-fits- all policies. We suggest that China’s rural policy in the new period should gradually shift from a sectoral to a place-based one, from top-down incentives to the development of bottom-up projects, and fully recognize the diversity of rural space, so as to lift localcapacities and make good use of the knowledge shared by different actors. Moreover, it is also necessary to integrate the various sectoral policies, and improve the interministerial and interdepartmental coordination of rural policies at regional and local levels.