Abstract :China’s manufacturing industry is facing multiple exchanges both in domestic and foreign demand u-nder the new pattern of“Dual Circulation”.In order to study how to successfully realize the transformation and upgrading of China’s manufacturing industry and to raise the country’s manufacturing power during the period ofrapid demand transformation,we analyzed the theoretical mechanism of investment’s impact on manufacturing  upgrading under demand shocks based on the machine-substitution model,and then constructed a two-equation model that investment affects the proportion of capital and labor and productivity to test the mechanism of corp-orate investmen ton manufacturing upgrading under different demand shocks by using a big data of listed comp-anies.Findings indicate that corporate investment has a significant role inpromoting manufacturing upgrades.   When the demand shocks gradually strengthen,the promotion effect of investment on the upgrading of the man-ufacturing in dustry gradually weakens,and the negative demand shocks are more conducive to stimulating the   transformation and upgrading of the manufacturing industry.When distinguishing ownership,we found that inv-estment is more likely to promote state-owned enterprises to increase the capital-laborratio,while the promotion of productivity improvement of non-state-owned enterprises is more obvious under same demand shocks.There-fore,the paper puts forward some policy suggestions for enterprises to realize technological innovation,transfor-mation and upgrading during the period of demand dip and expansion so as to realize precise policies under the extreme demand changes.

Keywords: demand shocks;investment decision;technological innovation;manufacturing upgrading;“dualcircul-ation”;the proportion of capital and labor;productivity