Cesarean delivery (CD) rates were until recently low in rural China where the population lacked healthinsurance. In July 2003 the New Cooperative Medical Scheme (NCMS) was introduced. We report findingsfrom a health systems study carried out in the EC-funded project ‘‘Structural hinders to andpromoters of good maternal care in rural China’’ in central and western China. The purpose was toanalyze how CD rates changed with the increased level of funding of the NCMS.The research design was a natural experiment. Quantitative demographic, administrative and accountsdata for 2001–2007 were collected in five counties from the county public health bureaux, the countyNCMS offices, the county statistical offices and the Maternal and Child Health (MCH) hospitals, usinga structured data collection form. We found that the CD rates increased in four of the five counties in theperiod 2004–2007 by 36%, 53%, 61% and 131% respectively. In the fifth county the CD rate remained highat 60%. The revenue from CD made up 72–85% of total delivery fee revenue. CD fee revenue increased by97%, 239% and 408% in the three counties with available data; a higher increase than in general healthcare revenue. Our conclusion is that the design of NCMS, the provider payment systems, and therevenue-related bonus systems for doctors need to be studied to rein in the unhealthy increases in ruralCD rates.