Abstract: Digital economy is an important driving force for manufacturing industry upgrading. Based on the panel data of 41 prefecture-level cities in the Yangtze River Delta region from 2010 to 2019, the level of transformation and upgrading of manufacturing industry and the degree of development of digital economy in the Yangtze River Delta were measured separately using the entropy weight method, and then the non-linear influence of digital economy development on the transformation and upgrading of manufacturing industry in the Yangtze River Delta region was analyzed empirically with the help of the panel threshold model. The results show that the digital development level and the transformation and upgrading level of manufacturing industry in the Yangtze River Delta region generally show an upward trend; the digital economy shows a significant positive influence on the rapid development of manufacturing industry and there is a double threshold effect, when the digital economy development is at a low level,which shows an inhibitory effect on the upgrading of manufacturing industry. When the digital economy crosses the first threshold, it plays the greatest role in promoting the upgrading of manufacturing industry, however, when the digital economy crosses the second threshold, its role in promoting the upgrading of manufacturing industry will be weakened.

Key words: Yangtze River Delta, digital economy, manufacturing industry upgrading, panel threshold mode