Do Protected Areas Exacerbate Rural Shrinkage? Research on China’s Gaoligong Mountain Region from an Institutional-Space Perspective

China’s territorial development is subject to multiple influences in new political, social, and economic contexts. In an era of increased globalization and urbanization, the construction of protected areas (PAs) as part of globalization has had a “double-edged sword” effect on China’s rural development; their impact has left a deep imprint on rural development, and understanding their relationship helps to achieve multiple goals. This paper discusses the changes in the urban–town–village system in the region where the Gaoligong Mountain Nature Reserve is located in China and attempts to analyze the impact of PAs on rural shrinkage. We found that the institutional embedding of PAs as a policy tool has led to regional differentiation and village shrinkage and expansion. Secondly, PAs stimulate changes in evolutionary paths in different types of villages by common forces through demographic, factor, capital, and policy constraints or incentives; however, the formation of new industrial spaces of ecotourism has a damping effect. We conclude that the embedding of PAs has led to a reconfiguration of spatial rights and capital in regional development, changing the original path of rural development. Adaptive development strategies must be established to safeguard this in future development.