Digital technology has changed the participation mode and spatial layout of global value chain (GVC), and provided opportunities and challenges for enterprises to cope with the new round of GVC remodeling. Existing research has paid more attention to the impact of digital technology on the division status in GVC, but less attention has been paid to how digital technology affects the production stages in the division of global values chain. This is undoubtedly not conducive to a comprehensive understanding of the reshaping effect of digital economy on GVC.

Based on Input-Output tables for China and firm-level customs data, this paper quantifies the production stages of Chinese firms in GVC, and further explores the important role that the digital economy may play in its evolution process. The findings are as follows: (1) We document a trend of rising first and then declining in the upstreamness of imports, stable positioning of exports, and rapid expansion in production stages conducted in China over the 2001-2013 period. (2) Processing trade firms and foreign-funded firms span more stages because of higher import upstreamness and lower export upstreamness. (3) The development of digital economy significantly promotes domestic firms to participate in more production stages and this effect is mainly realized by internalizing the input-side production stage originally located abroad. (3) The development of digital economy mainly promotes firms to participate in more production stages in the global production line through two channels: improving productivity and reducing external transaction costs. (4) The promotion effect of digital economy on general trading firms is stronger, and this effect can be effective only when domestic upstream industries have strong intermediate supply capacity such as production capacity and R&D capacity.

The contributions of this paper are that: First, it constructs a measurement index of the production stages of firms in GVC, and carefully examines how Chinese firms position themselves in global production lines from the perspective of spatial layout, which provides a new perspective and useful supplement for the research on GVC. Second, based on the number and scale of firms engaged in the digital economy in Chinese cities, it builds the digital economy development index, which helps to more scientifically and comprehensively investigate the development level of digital economy in each city. Third, it examines how production stages undertaken by Chinese firms evolve with the use of digital technology, which helps to deeply understand the reshaping effect of digital technology on the spatial layout of GVC, and provides a new idea for China to build a more secure and reliable supply chain system in the new era.