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Effective teacher education policies and programs underlie education quality and social equity. This study aims to examine the impact of China’s government-funded teacher education (GFTE) policy on the professional competence of teachers for hard-to-staff schools, in which professional identity and learning engagement mediated the impact sequentially, and whether GFTE program satisfaction moderates such impact. Based on a cross-sectional survey research design, questionnaires were administered to 465 preservice teachers and analyzed using structural equation modeling (SEM). Results showed that supportive policy satisfaction positively predicted professional competence; the positive indirect effects masked the negative influence of restrictive policy satisfaction; the moderation effects were significant. This study provides empirically-grounded evidence of GFTE’s effectiveness and has implications for teacher education policy and curriculum design.