Market competition is considered to have a significant impact on product diversification, but related issues are rarely discussed on a city scale. To analyze the diversification of export commodities and export market of 270 Chinese cities, this study uses data from 2000 to 2017 based on the commodity concentration index, market concentration index, export similarity index, spatial stratified heterogeneity, and the Almon lag model. The study's findings are: (1) The diversification of exports in most Chinese cities increased, which was higher in more developed cities in the southeast than in less developed ones in the northwest. With time, the degree of commodity and market diversification in some developed southeast Chinese cities (e.g., Shanghai) declined. This indicates the difference in and complexity of the evolution of export development in hundreds of Chinese cities between 2000 and 2017. (2) The export competition between cities became increasingly fierce, which effectively urged most of them to improve their export diversification levels. Facing increasing export competition pressure, 81.11% of the total number of cities will enhance the diversification of export commodities to cope with challenges posed by other cities. But only 56.67% will further expand the export market when the pressure of export competition increases. The biggest contribution of this study is the finding that for most Chinese cities, when export competition from other domestic cities increases, increasing diversification of products becomes a wise choice. However, the influence of competition on the diversification degree of the city's export market is relatively weak. This study provides not only a new perspective for existing research on urban export trade, but also valuable information for cities to form a more profitable and robust trading system.