Although China came to embrace the concept of essential medicines in 1979, a comprehensive national policy is yet to be introduced. In the most recent healthcare reform (2009–2011), the Chinese government proposed the establishment of the National Essential Medicine System (NEMS, 國家基本藥物制度), with the goals to make essential medicine available, control drug prices and improve rational drug use. This study is aimed to assess whether and to what extent this NEMS has achieved it intended objectives and to explore what factors influenced its implementation. Empirical data were obtained through questionnaire surveys, prescriptions and documents review conducted in rural primary health centers (PHCs) from four provinces (Shandong, Zhejiang, Anhui and Ningxia) of China during 2010-2011. Key informant interviews were also used. Results showed a median decrease of 34.38% in medicine price between 2009 and 2010. The declines were also recorded in the mean number of drugs prescribed per patient (from 3.64 to 3.46) and the proportion of patients being prescribed antibiotics (from 60.26 to 58.48%). Increases in the utilization of essential medicines had occurred. The injection and hormone use were improved significantly. All these positive issues were also recorded in 2011. The availability of essential medicines had reached 66.83% at PHCs by 2011. The PHCs’ income structure had changed and the proportion of drug income decreased. 93.31% patients and 92.54% PHC staffs were satisfied with the NEMS. However, current medicine prices remained high compared to international reference prices. Medicines were often unaffordable for poor residents. The new shortages of some drugs occurred. Over-prescription of v antibiotics and injections as well as poly-pharmacy remained common compared to WHO standards. More importantly, most PHCs encountered substantial financial losses. The compensation of health-care providers for NEMS-related reductions was largely ineffective. To conclude, NEMS is heading in the right direction and has its intended impact on access to and rational use of medicines. The remaining negative outcomes might be indicative of problems in policy design and implementation. China now needs to address gaps and challenges to bring about its stated reform goals. Policy implications were discussed.