At present, China’s economy is in the key stage of the transformation of development mode and the transformation of new and old kinetic energy. Whether it can successfully cross the middle-income trap has become an important issue of general concern. Driven by artificial intelligence, blockchain, cloud computing, big data and other underlying digital technologies, the fourth industrial revolution with the booming digital economy as its main content has provided important opportunities for China’s economy to “overtake” and cross the middle-income trap.

In sharp contrast to the booming digital economy, few literatures focus on the impact of digital economy development on crossing the middle-income trap under the background of economic structure transformation. In particular, the research on how to promote high-quality economic development through the supply side and demand side of the economic structure transformation brought by the development of digital economy has not been mentioned. This study shows that: （1）The key to cross the middle-income trap is the transformation of development mode, the optimization of industrial structure, and the transformation of growth momentum brought by the deep integration of digital economy and real economy.（2）From the perspective of the supply side, digital economy can improve the quality and efficiency of the supply side and promote the structural reform and economic growth of the supply side from the following three aspects: First, the supply system is high-quality, efficient and diversified; second, the innovation system is networked, open and collaborative; third, the mode of production is modularized, flexible and socialized.（3）From the demand side, digital economy can help the new momentum of the “troika” by changing the direction of market investment, promoting consumption upgrading and cultivating export advantages.（4）To successfully cross the middle-income trap, we should adapt to the basic law of the succession of development stages, and promote the fundamental transformation of the driving force of economic growth; strengthen the data elements as the supporting role of digital economy, and boost the high-quality development of digital economy; promote the integration of digital economy and real economy, and accelerate the process of digital industrialization and industrial digitization.

The possible contributions of this paper are as follows: First, it analyzes the domestic and international situations and challenges faced by China in crossing the middle-income trap, and points out the practical significance of the development of digital economy for China in crossing the middle-income trap. Second, from the perspective of economic structure transformation, it analyzes the potential of quality change, efficiency change and dynamic change of China’s economic development, which points out the direction for the transformation of new and old kinetic energy, the improvement of total factor productivity, and the high-quality development of economy and society. Third, it analyzes the role of digital economy in improving the efficiency of the supply side and accurately matching the supply and demand, and demonstrates the positive impact of digital economy on the supply side from the three aspects of supply system, innovation system and production mode. Fourth, it analyzes the specific ways of digital economy development to revive the demand side “troika”, and summarizes the mechanism from the three aspects of market investment direction, consumption upgrading and new export advantages. Fifth, it puts forward a Chinese plan to cross the middle-income trap under the trend of economic digital transformation, which provides theoretical support for the government to formulate relevant policies and cross the middle-income trap.