In March 2006, China’s National People’s Congress officially promulgated the central government’s intention to “build a new socialist countryside”, a new policy initiative and approach to rural development. Drawing on fieldwork conducted in two Chinese counties in 2008 and 2009, this article investigates how the new policy is being substantiated and implemented at the local level. It argues that by combining China’s new fiscal system of transfer payments to poor local governments with administrative reforms, intensified internal project evaluation, and efforts to increase the rural income through a mixture of infrastructural investment, agricultural specialization, the expansion of social welfare, and accelerated urbanization, “building a new socialist countryside” constitutes more than a political slogan and has the potential to successfully overcome rural poverty and the rural-urban divide.