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Promoting the biomass industry in China would provide significant ecological, economic, and societal benefits by ameliorating soil and groundwater pollution and providing a sustainable energy source. However, although there is great potential for expanding the biomass industry in China, it currently faces large obstacles, with respect to its utilization, low economic performance, and other limitations. This study conducts a comprehensive literature review on biomass utilization methods, and establishes a new recycling model that couples the use of anaerobic digestion (AD) and its byproducts with biochar. In the model, biomass waste is used for biogas and biochar production, and biogas residues are further cracked into biochar. Biochar is also used as an additive to modify the AD process and promote methane production. In addition to its single application, biochar is further used in combination with biogas slurry or residue as a soil conditioner to repair soil and promote the growth of crops. This circulation model differs from models in which biomass alone is used in biogas or biochar production, and it combines all processes to promote the use of biomass, increase its conversion efficiency and strength the applications of such processes in the agricultural sector. Previous reports have shown that each part of the model can play a positive role in improving overall efficiency. Therefore, the application of the combined circulation model would be beneficial in biomass utilization and as such is a promising method for promoting the sustainable development of energy and agriculture in China, while protecting the environment.