In China's latest school funding reform, the central government remarkably increases input in basic education. However, this fiscal re-centralisation of education provision is implemented through a highly decentralised administration structure and yet local governments have long been criticised by the public for their inefficiency and misconduct. This paper depicts a snapshot of how school funding policies are practiced in rural China at grassroot government levels. It also discusses the implication of such praxis, drawing on the concept of equity underpinning Australia's recent review on school funding. Selecting Shandong Province as a case study, this paper firstly analyses publicly accessible online documents on funding policies, released by the state, provincial, prefecture and county governments, to map out the procedures and models of school funding in rural areas. The second set of data was collected through interviews and focus groups with officials from local education authorities and school principals, so as to create a real-life portrait of policy implementation. This empirical study discovers that waste of resource coexists with insufficient funding: biased funding reinforces school hierarchy, improper means are employed to identify students with financial needs, disabled children have strikingly limited access to education, and students with learning difficulties are largely ignored. This paper argues these deficiencies can be explained by local governments' operational preference. In short, local governments' active involvement in school funding process may have aggravated inequity.