Abstract: This paper examines how regional digital infrastructure upgrades (exemplified by smart-city initiatives) shape firms’ supply-chain trade from a production-network perspective. The results show that digital infrastructure significantly boosts trade activity, with policy effects propagating downstream along the production network. Mechanism analysis shows that digitalization enhances internal management efficiency, fosters the use of digital platforms for information integration, and improves firms’ network centrality, thereby strengthening search and matching efficiency and ultimately stimulating trade growth. The findings offer micro-level evidence on how digital infrastructure supports industrial upgrading at the regional (especially county and district) level and provide a conceptual framework for government-firm interaction in digital transformation, with implications for advancing high-quality domestic circulation.

Key words: digital infrastructure, regional domestic circulation, supply-chain spillovers, government-firm interactions