Abstract:using CEPII-BACI database, Chinese industrial enterprise patent database and Chinese industrial enterprise database, we systematically test the effect and mechanism of import competition on innovation of Chinese manufacturing enterprises. The results show that: import competition significantly reduces enterprise product innovation, and its inhibition effect on incremental innovation is stronger than that on radical innovation; heterogeneity analysis shows that import competition has more significant negative effects on innovation of high competitive industries, high government enterprise affiliated enterprises and low-tech industries; intermediary effect model test shows that Schumpeter effect is the main factor for Chinese manufacturing enterprises to cope with import competition mechanism. Therefore, this paper puts forward some relevant policy suggestions, such as appropriately slowing down the import promotion in the areas urgently needed by the country and with urgent innovation mission, improving the government"s R D subsidies and improving preferential policies, and realizing the two wheel drive of enterprise product innovation and service transformation.