Abstract: How to effectively capture the increment of land value and utilize it for public welfare is a major issue commonly faced by developing countries. This study, based on Henry George's "land value capture for public use" theory, Hartmann-Spiegel's "active-passive" dichotomy, and the positive feedback mechanism of historical institutionalism, adopts the process-tracing method to reveal the transformation process and generation logic of China's land finance. The research finds that over the past four decades, the central government has achieved a shift from a private-led passive model to a government-led active model of land finance through legislative reconstruction, institutional rebuilding, anti-corruption and clearing obstacles, and financial empowerment. It has established the world's largest active land value capture system, which has supported China's rapid urbanization and infrastructure modernization. However, this model has also led to a path dependence of local debt expansion. Coupled with negative population growth and deep adjustments in the real estate sector, the traditional land finance model that relies on incremental expansion is no longer sustainable. The study suggests that the central government should continue to follow George's idea of "social sharing of land value increment", establish a full-cycle "land value increment for public use" mechanism, increase the proportion of land revenue used for public welfare expenditures, and accelerate the construction of a fair and sustainable modern land public finance system to promote the transformation of land finance from a "growth machine" to a "fair cornerstone".