Abstract: Abstract： In the implementation process of Chinese export-oriented economic development strategy, it is notable that the local industrial sectors, especially the equipment manufacturing industry, is lack of sufficient demand, thus it is very difficult to achieve a favourable cycle of industrial technology innovation. One at reasons is that foreign direct investment has a crowding-out effect on the market demand scale of local enterprises. Another reason is that the preoccupation of the division system of global value chain has made the consumers have low-end trend demand for the domestic products. Based on the transmission mechanism of the demand-driven innovation, the concept of effective demand scale is extended from the perspective of open economy, and the characteristic of double demand structure under the theoretical framework of global value chain is analyzed. Then, the conclusion that the lack of effective demand scale and the low-end trend of demand structure are the key factors to inhibit the promotion of industrial innovation capability is summarized. Granger causality test shows that there exists strict two-way causal relationship between effective demand scale and industrial innovation capability; the fixed effect model of the panel data shows that the demand structure has relatively weak impact on the technology innovation of China’s equipment manufacturing industry, because the local enterprises have been locked in the low-end value chain for such a long time that it can’t encourage the independent research and development. As a result, the policy oriented by breaking the constraints of demand factors is a fundamental way to enhance innovation capacity.

Key words: effective demand scale, double demand structure, equipment manufacturing industry, industrial innovation ability