Does China’s ‘increasing versus decreasing balance’ land-restructuring policy restructure rural life? Evidence from Dongfan Village, Shaanxi Province

China’s ‘increasing versus decreasing balance’ land-restructuring policy is an innovative, top-down institutional land reform. Using the case study method, this study reviews the policy by examining its restructuring impacts on rural life. By deconstructing the procedures involved in the transfer of land development rights, we clarify that the economic benefits obtained from the trade of land development rights fund the entire project. Thus, the allocation of these economic benefits plays a pivotal role in restructuring rural living, production and ecology. We further analyze the case of Dongfan in Shaanxi Province, and our results show that approximately 60% of the economic benefit was used to demolish and re-construct settlements for peasants, while less than 25% was reserved for the development of rural industries. This distorted benefit allocation stemmed from the local governments’ pursuit of an increased quota for construction land use, which consequently generated weak impacts on restructuring rural life in Dongfan. Although their living conditions have improved, the outflow of peasants persists, thus producing a second round of village hollowing. The results of the policy indicate a need to pay more attention to rural industrial development in future programs and to examine the possibility for more radical land reforms in China, which could serve as a positive reference for village renewal and poverty alleviation in other countries.