This paper establishes the relationship between firms and explores a possible development path of China's economy: improving efficiency of debt. In recent years, the growth of Chinese economy has been accompanied by a rising trend in the size of Chinese government debt, but corporate yields are falling. With the increase of research on the scale of local government debt in China, the research on efficiency of debt has been less involved. This paper calculates the efficiency of China's local government debt and firm productivity of prefecture-level cities and finds a misallocation between economic development and the efficiency of debt. We reveal that the efficiency of debt has a non-linearly U-shape effect on firm productivity, and further find industry and equity heterogeneity in different firms. In conclusion, there needs to be a reasonable match between efficiency and scale to promote high-quality development of firms, thus boosting high-quality development of Chinese economy.