This paper examines local government’s incentives and policy implementation in the rural school consolidation (RSC) policy in China. This paper indicates that the ultralargescale rural school closures and consolidation in China since 2001 can partly be explained by local government’s incentives under the institutional context of political centralization and fiscal decentralization. Using countylevel educational finance statistics data and socioeconomic statistics data, we demonstrate that the differences in local incentives, including fiscal decentralization, political competition, urbanization and economies of scale, are the main driving factors of the differences in the declining number of rural primary schools as a result of the rural school consolidation policy.