The chasing dragon: to what extent and how does China catch up with USA under global value chains?

Meng Niu, Zhenguo Wang, Yabin Zhang and Yuhang Mao

Applied Economics, 2025, vol. 57, issue 8, 839-852

Abstract: An indisputable fact in Global Value Chains (GVCs) is the rapid catching-up of China with U.S.A.; however, the convergence speed and depth have yet remained to be explored. On the one hand, the heterogeneity of different business functional activities, i.e. management, R&D, marketing and fabrication, is barely discussed. On the other hand, the international income transfers further complicate catching-up issue, since wedge between value-added and national income exists. Taking account of both them in a global multi-country input-output setting enables us to better understand the speed and depth of catching-up for China vis-à-vis U.S.A. China has made progress on narrowing the gap, albeit slowing down in the mid-2010s, but far from complete. This convergence speed is unevenly proceeded across business functions/industries. Similar catching-up finding holds for our new national income approach, but to a lesser extent. GVC participation scale enlarging and productivity improvement jointly lead to this catching-up, wherein scale contributes more than does productivity. We also find that the scale role is quite heterogeneous across business functions and industries. Despite catching-up in productivity at all levels, but starting from an extremely low level, a major lagging productivity gap remains. Also, the increasingly important role of productivity is observed.

Date: 2025
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DOI: 10.1080/00036846.2024.2309460

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