This study focuses on eastern China and samples the villages of Xinsi and Qingshan in Shandong Province to explore rural socioeconomic and demographic changes and their interaction with policies. Amid global urbanization, China’s rural population has migrated to cities on a large scale, causing challenges such as “rural emptying,” aging, environmental issues, and inadequate infrastructure. The government has implemented a number of policies aimed at modernizing agriculture, improving farmers’ welfare, and reducing the gap between urban and rural areas. The objective of the study was to assess the effectiveness of rural development policies, particularly in response to demographic and socio-economic changes, and the interaction between local policies and practices. Combining macroeconomic policy analysis, agricultural planning, land-use data, demographics, field visits and case studies, this paper compares the two models of rural development in inland and coastal areas. The study reveals that China’s rural areas are undergoing demographic shifts, with labor migration leading to “hollowing out,” while promoting diversification and compound transformation of the agricultural economy, such as the rise of non-agricultural industries and the development of rural tourism. At the policy level, China’s rural strategy has undergone an evolution, emphasizing agricultural modernization, optimization of industrial structure, and infrastructure construction, while current policy emphasizes innovation, sustainability, and inclusion, reflecting a “people-oriented” and “solving the problems of agriculture, rural areas and rural areas.” The policy effect is affected by regional differences, highlighting the configuration of China’s diverse geography, economy, and culture in the path of rural development and policy response. The cases of Xinsi and Qingshan villages show how rural communities can innovate multifunctional development models based on resource characteristics, connect with or challenge policy frameworks, and explore new avenues of development. Xinsi Village can actively promote the development of the surrounding service industry through cooperation with local enterprises, while Qingshan Village is expected to take advantage of coastal advantages to develop marine economy, rural tourism and modern agriculture, while protecting and inheriting the local culture.