It is common AFAIK. The most used launch sites (there's one on Hainan where rockets only go over the ocean, but it's the least used) are pretty far inland and they don't seem to mind if boosters land on the people there or if the villages get toxic fuel sprayed on them.
China has four major launch sites. Wenchang, the one on Hainan, is used for human spaceflight. Larger cargo rockets use Jiuquan in the middle of the Gobi Desert. It's the other two, Taiyuan and Xichang (this one), that are relatively close to rural villages, although both are still very remote by Chinese standards.
