How does intermediate consumption affect GVC positions? - A comparison between China and US

Using the data of the World Input and Output Table (WIOD) from 2000 to 2014, this paper measures the positions of China and the US in the global value chains (GVCs). We develop a new dual structural decomposition method to analyze the drivers behind the GVC position differences between the two countries from the perspective of intermediate consumption. The results show that (1) China is moving away from both end-users and primary factors, while the U.S. is moving towards both ends of the GVCs. The gap between China and the US in GVCs is widening. (2) About 40% of the difference between the GVC positions of China and the US can be attributed to the difference in industrial structures between the two countries, and the remaining 60% is related to the difference in the GVC positions of the same industries between the two countries. (3) China's three major industries are all embedded in a further GVC position from households, governments, and investors (HGIs) than the US, but they are formed for completely different reasons. The domestic direct effect is the main reason for the resource industry, the multiplier effect is the main driver for the manufacturing industry, and the domestic linkage effect is the main factor for the service industry. (4) The different roles of the two countries in the international division of labor result in the difference in the two countries' consumption coefficients of the manufacturing and service sectors, and the asymmetric interaction between industries ultimately leads to the differentiation in the GVC positions of the industries between the two countries.