Transforming traditional agricultural economy into modern economic growth path is the main theme of economic development. Through theoretical and empirical analysis, we find that the key of transformation is to raise the economic value of people, to improve human capital investment and to match the stocks of physical and human capital. China's rural economy is on the edge of economic takeoff, and different zones may pursue different paths for transformation. The source of rural poverty is not the scarcity of income or consumption, but the deficiency of education, social security, medical care and opportunity, which we define as 'capability 'poverty'.