Abstract:How China"s manufacturing industry can achieve industrial upgrading on the basis of existing production capacity is a topic of general concern in academia. To this end, this paper takes knowledge spillover as the starting point, and seeks for reference for the development of China"s manufacturing industry by revealing the development status of the manufacturing industry in China, the United States, and Germany and the differences in the path of industrial upgrading. Taking 3 million trade data of more than 2,000 kinds of manufacturing industries around the world in the past 30 years as the research sample, and taking China, the United States, and Germany as the research objects, comprehensively using the social network method, product space theory and Logit regression model, it has an in-depth discussion on China, the United States, and Germany. The role mechanism of American and German manufacturing knowledge spillover in the process of industrial upgrading. The study found that: the products in the core area of China"s manufacturing product space have not yet formed a large-scale production model; the industrial upgrading of China"s manufacturing industry more follows the "incremental development" path, and the blind pursuit of the effect of knowledge spillover may bring risks; China"s participation in Since the WTO, it is not only possible to achieve incremental industrial upgrading by relying on the accumulation of production capacity, but also to achieve industrial upgrading through disruptive innovation under the interaction of the accumulation of product production capacity and the intensity of knowledge spillovers.