This paper investigates the impact of the digital economy on urban innovation levels in mainland China using a quasi-natural experiment based on the "Digital China" strategy. Employing panel data from 286 cities and the multi-temporal double-difference (DID) method, the study finds that the digital economy significantly improves urban innovation. Robustness tests confirm this positive effect, which is primarily driven by industrial structure upgrading. Heterogeneity analysis reveals a stronger impact on high-quality innovation and a more pronounced effect in the Middle Eastern region compared to the Western region. The findings suggest accelerating the implementation of local digital economy strategies to enhance regional economic development.

Chong Zhang, Baoliu Liu, Yuhan Yang