Liuyang produces about 40 percent of China's total fireworks and firecrackers.
Posts calling for people not to set off firecrackers during the upcoming festival are circulating on Chinese social media platforms, including the Twitter-like Sina Weibo, and on WeChat, a popular mobile text and voice messaging application.
Many have pledged not to shoot firecrackers for cleaner air.
A recent online survey on Sina Weibo organized by Zheng Yuanjie, a renowned Chinese fairy tale writer, showed that 85 percent of the 1,585 participants agreed not to shoot firecrackers during the upcoming Spring Festival.
To survive this predicament, Chinese fireworks manufacturers are developing environmentally friendly products and tapping the rural market, which is less affected by air pollution.
"Environmentally friendly fireworks that produce less smoke account for 20 percent of the product portfolio at many companies now," said Zhong Ziqi, head of the China Fireworks and Firecrackers Association.
"In the next three to five years, they will make more breakthroughs in smoke reduction and add more artistic and cultural value to the fireworks," he said.
Future products will not contain heavy metals or sulfur, and will reduce the use of metallic powder to cut down inhalable particles, he said.
In contrast to the sluggish domestic market, exports have increased by 20 percent this year at Liuyang Jinsheng Fireworks Co Ltd due to its ample supply of "greener" fireworks, said Ye Changjiang, the company's deputy general manager.
Environmentally friendly fireworks are 10 percent more expensive than normal products, and it is difficult to win Chinese customers' acknowledgement, said Ye.
Promotion from governments and rising consumer awareness of cleaner fireworks are key to revitalizing the industry, said Ye.