In order to relieve rural poverty and solve the problem of soil and water erosion on marginal land, various provinces and regions throughout China proclaimed a new policy in the late 1980s and early 1990s. This 'Four Wastelands Auction Policy' attempts to boost the development of land of low economic value through the auction of land leases, not only to the rural but also to the non-rural population. In this sense, the policy forms a double break with the past. First, it was initiated at the grassroots and thus signifies a larger manoeuvring space for local cadres to launch new-sensitive-policies. Second, access to rural (marginal) land is no longer restricted to farmers but has also become available to officials, urban entrepreneurs and citizens. By relying on concepts of institution building, two village case studies provide a detailed overview of the implementation of the wasteland auction policy in the Ningxia Hui Muslim autonomous region in northwest China, and its implications for poverty alleviation and soil and water conservation.