China has considered tourism development as an important policy for reducing rural poverty. However, various governances of tourism development have affected local livelihood in different ways. Here, we assessed local livelihood under the community-based (CBT) and lease-to-operate tourism (LOT) governances in two tourism villages; the Jade and Phoenix valleys located in the World Heritage mountain area of Huangshan. We used the sustainable livelihood approach to assess the local household livelihood assets and institutional arrangements that exist in this area with respect to tourism development. Five capital assets were analyzed according to 15 indicators. Values for natural, physical, human, social, and financial capitals were generally higher for CBT. Overall value for livelihood assets was 0.89 under the CBT compared to 0.51 under the LOT indicating that CBT contributed more to livelihood improvement in the rural area. Therefore, the CBT should be promoted as a policy for poverty alleviation in China.