The vocabulary of “demand dividend” is commonly seen in various news media reports, but the literature on the empirical analysis of “demand dividend” in the development of China’s manufacturing industry is still rare, and there is little literature on the demand dividend of China’s manufacturing export trade activities from the perspective of the advantage of large domestic markets. As the relative importance of traditional factor inputs in China’s manufacturing industry’s participation in international trade continues to decline, the advantage of large domestic markets will be transformed into a manufacturing export competitive advantage by releasing the demand dividend, which may be an important path for China to promote manufacturing export value during the period of transformation and upgrading and high-quality development.

In this paper, the city-level market potential indicator is used to reflect the domestic market advantage possessed by the city, and the export DVAR of enterprises calculated by the data of Chinese industrial enterprises and customs trade is used to reflect the value-added capacity of manufacturing export, and then the impact of the advantage of large domestic markets on the rising export value of manufacturing industry is discussed. The results show that: Compared with international market potential, domestic market potential is more conducive to increasing the DVAR of manufacturing exports. Therefore, China’s manufacturing industry has a clear domestic market advantage in promoting the rise in export value. Domestic intermediate product categories, intermediate product efficiency, and corporate marginal cost all play an intermediary role in the process of the advantage of large domestic markets promoting the DVAR of manufacturing exports. Domestic market potential and international market potential have obvious synergies in the process of increasing the DVAR of manufacturing exports, but the excessive intervention by local governments weakens the full play of the advantage of large domestic markets.

The marginal contribution of this paper may exist in the following aspects: Firstly, it provides new theoretical support for cultivating and exploring market potential advantages in various regions, thus promoting the manufacturing industry to climb the high value-added link of the value chain. Secondly, it uses more reasonable accounting methods to complete the key indicators which are missing in the Chinese industrial enterprise database during the sample period. Thirdly, it examines the mediation effect of indicators, such as the efficiency of domestic intermediate products and the variety of intermediate products, in the process of market potential affecting the increase of the DVAR of manufacturing exports. Fourthly, it not only further explores the interaction mechanism between the two different market potentials, but also takes the role of government intervention into consideration, and then explores the mechanism and impact of domestic and international market potentials on the DVAR of manufacturing exports under government intervention.