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China's rural development policy with a focus on state-led individual land tenure has yet to address the pressing challenges of rural poverty and natural resource deterioration in semi-arid regions. Incongruent with local ecological, social and political conditions, the current land tenure system has failed to offer peasant incentives in following government policies. Rather, it has contributed to rising social and political tensions. This case study is based on a poverty-stricken county that is experiencing the aggravation of soil aridity and natural disasters in North China. It examines the linkages between land tenure, poverty and natural resource governance. It emphasizes how the local peasantry perceives these issues and struggles for livelihoods. It argues that the appropriateness of a land tenure system can only be achieved if the fragmented nature of the individual tenure can be redressed through innovative institutional designs. It contributes to a critical understanding of China's agrarian reform by articulating the need for land tenure diversity that serves the overall goal of sustainable land use and management and shapes sound state-peasant relations. [ABSTRACT FROM AUTHOR]