Abstract: Abstract: The huge local government debt in China is a consequence of development needs and investment impulse. It is both an economic and institutional issue. The analysis of local government debt should be built on the principle of neutral in-vestment. Resolving local government debt issues requires a series of reforms and institutional innovations promoted by local governments. This paper summarizes medium- and long-term factors contributing to the increase in local government debt in China, pinpointing the main characteristics of current local government debt. Additionally, it provides an in-depth comparison of Chinese and Western urban asset management models and analyses the differences between central and local government finances. Based on this foundation, the paper proposes several measures and suggestions to resolve these issues at both the local and central government levels.