This dissertation is concerned with trends in poverty, inequality and living standards among the counties and villages of Anhui and Yunnan since 1978. Trends in absolute poverty, measured by both income- and nutrition-based poverty lines, show only a small decline during the 1980s. Based on province-specific poverty lines, there is a substantial increase in the incidence of poverty during the late 1980s, over the incidence based on a national poverty line. The overall trend in living standards is of increasing dispersion, for Anhui and Yunnan relative to the national average, and between the counties of the two provinces. Living standards show little change for the counties of Yunnan, with declines outnumbering increases. In Anhui, the large increase in mortality between the 1982 and 1990 censuses contribute to declines in absolute living standards as well. Increases in spatial inequality are apparent from the output data; differentials in the rate of economic growth fuelling this increase in the 1980s. In essence counties thrive or languish based on the performance of their agricultural sector. Rapid improvements in yields for basic food stuffs, and expanding cash crop production in many regions, together cause income levels to rise, and therefore living standards, based on commodities, to increase as well. Where this is not the case, there is a lack of investment funds for the establishment of private and collective rural enterprises, and a lack of consumer demand. The low level of income, and the small size and slow growth in the xiangzhen give sector in disadvantaged areas also means that local governments are short of revenue, and therefore the costs of health care and education are left to the individuals requiring these services, exacerbating the gap between rich and poor in terms of achieved functioning. The question of how to increase the profitability of the agricultural sector in poor areas of China remains unsolved. Without a source of investment funds and increasing incomes to foster modern sector enlargement growth in rural areas, it is difficult to imagine an increase in either commodity or non-commodity based functioning in the poor regions of rural China in the near future.