Abstract: China's digital trade is trapped in the dilemma of“imitative innovation”and “low-end locking”due to its“both ends outside”embedding pattern in the global value chain. From the perspective of innovation ability and product space, this paper uses the input-output method to explore whether the new pattern of dual circulation can promote the high-quality development of China's digital trade. The results show that the new pattern of dual circulation is playing a significant role in promoting the high-quality development of China's digital trade. Participating in the international circulation has a positive impact on the high-quality development of China's digital trade through the intermediary channel of the backward imitative innovation capability, while participating in the domestic circulation has promoted the high-quality development of China's digital trade through the intermediary channel of the forward independent innovative capability, and their promotion effects are affected by product space density and product technical complexity respectively. The expansion analysis reveals that there is heterogeneity in the impact of the new pattern of dual circulation on the quality of China's digital trade. This study provides important policy enlightenment for China's digital trade enterprises to deal with the impact and challenges of the counter-globalization and external risks, form a new pattern of dual circulation, especially make use of the super large-scale advantages of domestic unified large circulation to cultivate local independent innovative ability, and improve the product space density and the technical complexity, so as to finally realize the high-quality development of China's digital trade.

Key words: the new pattern of dual circulation, digital trade, high-quality development, innovation ability, product space