Using household survey data among 9107 families from five provinces of central and western China in 2010 and a propensity score matching method, this article investigates the effects of receiving welfare benefits from China’s largest social assistance program, Dibao, on family expenditure patterns in rural areas. We find that families receiving Dibao prioritised spending on healthcare rather than making ends meet. However, rural Dibao receipt was unable to help lift family expenditure on education. We also find some evidence that Dibao receipt was associated with decreased spending on social participation, an unintended negative effect of this large social assistance program. Future reforms of rural Dibao and other social protection programs should address such adverse effects to avoid intergenerational transmission of poverty and social exclusion, taking into consideration the unique tradition, culture, and context of rural China.