The construction of a new development paradigm of “dual circulation” has created a favorable environment for data flow, providing new momentum for the dynamic transition of China’s manufacturing sector towards comparative advantages. This paper uses merged data from China’s and the world’s input-output tables (2012-2017) to examine the impact of manufacturing participation in dual circulation on industrial comparative advantages at the provincial and industry levels, with a focus on the mediating role of data flow. The findings suggest that both domestic and international circulation improve China’s manufacturing comparative advantages. However, the positive effect of international circulation is more pronounced through general trade, while processing trade faces a threshold effect based on technology absorption capabilities. Mechanism testing shows that data flow is a key conduit for dual circulation’s impact on comparative advantages, with domestic and international circulation boosting regional and cross-border data flow, respectively. Further research indicates that the differences in the data flow environment and endowments will affect the comparative advantage enhancement effect of dual circulation, with advanced infrastructure regions and economies with stronger intellectual property protection fostering greater improvements in manufacturing comparative advantages. High-tech industries and the five major city clusters are more conducive to gaining benefits from dual circulation. The findings offer valuable insights for optimizing digital economy policies and formulating strategies for high-quality manufacturing development.