Abstract: Using registration data from nearly 68 million enterprises in the China Business Registration Database, this paper compiles and analyzes the status of newly registered enterprises across Chinese cities. It proposes a method for determining enterprise size based on registered capital and conducts a descriptive analysis. Empirical findings reveal that an increase in the degree of fiscal decentralization in a city raises the proportion of newly registered micro and small enterprises while lowering the proportion of large and medium-sized enterprises. After changing the measurement method for micro and small enterprises, grouping cities by whether they are provincial capitals, retaining samples from specific years, and using instrumental variables to mitigate endogeneity issues, the results remain consistent with the basic regression. Mechanism analysis indicates that the overall decline in the number of registered enterprises in cities with higher levels of fiscal decentralization—particularly the decline in the number of large and medium-sized enterprises—is the primary reason for the rise in the proportion of newly registered micro and small enterprises. Higher levels of fiscal decentralization lead to increased municipal fiscal expenditures, which cannot sustainably support the development of large and medium-sized private enterprises. Therefore, it is necessary to clarify the roles of government and the market in economic development, utilize fiscal policies appropriately, and prioritize the growth of micro and small enterprises as well as newly registered enterprises to foster a healthier market competition environment.
