City-Level Market Contexts and Cross-City Disparities in Chinese Firm-Survival

This paper investigates how city level economic and demographic conditions shape firm-survival across Chinese cities. Using 2000-2024 panel data covering 50 cities and over 5 million firms, this study applies principal-component analysis (PCA) to handle high indicator correlation and constructs three composite indices: economic opportunity, business-pressure, and population-base index. These indices are incorporated into weighted least-squares regressions. The baseline specification controls for year, industry and firm ownership fixed effects, while the preferred model further adds city fixed effects; unweighted OLS serves for robustness checks. Baseline results show the population-base index has a significantly negative association with firm-survival, whereas economic opportunity and business-pressure indices are statistically insignificant at conventional levels. Once city fixed effects are included, all three indices lose significance. This suggests observed cross-city firm-survival gaps stem largely from persistent intercity structural differences rather than short-run within-city changes. Robustness tests reveal operating pressure correlates negatively with firm-survival rates. Overall, firm-survival disparities are pronounced across Chinese cities, requiring researchers to distinguish cross sectional city differences from over time within-city variations when analysing urban environment firm-survival linkages.