This paper constructs an indicator to evaluate the city-level business environment in China from 2011 to 2020. From the perspective of corporate bond issuance, the effect of the city business environment on financial asset pricing is examined. The results show that an improved city business environment can reduce bond issuance spreads for local firms. In addition, this effect becomes more pronounced following the acceleration of the bond market marketization (The breaking of rigid payment and the net-value transformation of the asset management products guided by the “New Asset Management Regulations”). Mechanism analysis reveals that optimizing the business environment significantly reduces business uncertainty and enhances the information transparency of local firms, thereby reducing the credit risk premium and liquidity premium of their bonds. Heterogeneity tests show the effects of the business environment on bond issuance spreads are more pronounced during periods of higher macroeconomic policy uncertainty, local government leadership transitions, and for longer-maturity bonds. Meanwhile, the different dimensions of business environment have varying impacts on bond issuance pricing. This study reveals that the business environment is a key factor in explaining the inter-regional differences in financial asset pricing and enriches research on its economic consequences by highlighting its role in enhancing the efficiency of regional financial resource allocation.