The Reconfiguration of Global Value Chains in the Digital Economy: Recent Trends and China's New Agenda

In the era of the digital economy, three reconfiguration trends in global value chains (GVC) are emerging. (1) GVCs are becoming more regionalized; (2) complex value chains are shrinking; and (3) the driving forces of GVCs are changing with on-demand supply chains and digital platforms. The main findings of this chapter are: (1) Digital technology reduces the difference of global labor costs contributing to the division of several regional value chains from GVCs, with national institutions and regional FTAs accelerating this tendency; (2) “platform companies” became a new driving force of GVC governance; and (3) digital technologies such as intelligent logistics, telecommuting, and machine translation raise the possibility of reshoring through the reduction of trade costs. These changes present both challenges and opportunities for China’s future roles in GVCs. The chapter argues China should analyze the theoretical mechanism of the digital economy's impact on the reconstruction of GVCs from four dimensions: factor endowment, market size, geographical distance, and institutional quality. To leverage the competitive advantages of China as the center of regional value chains, the efficient countermeasures of China are to accelerate the combination of the digital technology and traditional industries, namely, accumulation of new comparative advantages of data as production factor, cultivation of general digital skills, provide comprehensive top-level design of digital platforms, construction of digital market supervision system, development of new business forms of digital economy, and building up of digital governance.