<p>China’s urbanization process is astonishing, this paper innovatively proposes a theoretical framework for the impact of local government financing vehicles (LGFVs) on imbalanced urbanization and empirically analyzes the unexpected effects of these local government-backed investment units on land and population urbanization. Using the panel data of 281 prefecture-level cities in China from 2006 to 2017 and establishing the double fixed-effect models, we find that LGFVs are influential in accelerating the urbanization of land and population in China. However, it also drives to factor imbalances between population and land, especially in the less economically developed western regions. Further mechanism analysis indicates that LGFVs promote both population growth and urbanization through increased public utility supply. However, by expanding urban spatial supply, it unilaterally accelerates land urbanization, thereby resulting in factor imbalance. These above conclusions provide evidence for understanding the unexpected effects of LGFVs and provide recommendations for the management of financing instruments.</p>