Shangri-la County in the northwest of China?s Yunnan Province is currently undergoing a boom in state-led tourism development. The following is a discussion of the impact that this is having on local economic development and poverty alleviation in the region. While tourism has spurred local economic growth and increased local state revenues, it is often assumed that there is a ?trickle-down? benefit to the poor. This assumption is based on a misunderstanding of poverty that has the potential to lead to greater impoverishment rather than poverty reduction. This paper considers recent developments in the region in an effort to show that tourism cannot help alleviate poverty unless opportunities are created for the poor within tourism. If tourism development is to bring real benefits to the poor, the prefecture and county governments cannot make decisions in isolation from other social and economic policies.