Abstract: The change in the position of China's being embedded in global value chain (GVC) will have a significant impact on the income gap between high and low skilled labor as the embedded GVC is closely related to income distribution. This paper, based on the empirical analysis of China's manufacturing industry (1995-2009), finds that: firstly, being embedding in the global value chain helps to narrow the income gap between high and low skilled labor, a result which is achieved by moving downstream of the value chain; secondly, the impact mechanism of the above role is to change the relative demand of the two kinds of labor in the factor market so as to narrow the wage gap at the margin; thirdly, the level of technological competitiveness of industry moderates the impact mechanism mentioned above, that is, the more advantages one industry enjoys, the smaller impact of changes in GVC position it has on labor income gap. China's being embedding in the global value chain, the paper also concludes, helps to narrow income disparities and promote fair income distribution; with technological innovation as a new advantage in China's international competition, corresponding measures need to be adopted: 1) to put various manufacturing industries in a higher position of the global value chain through policy guidance; 2) to strengthen labor skills training targeted to the low skilled according to the needs of economic development; 3) to facilitate the combination of industry, academia and R&D institutions for more technological competitiveness so that the income gap does not widen again; 4) to grasp the core competitiveness of the value chain so that China's manufacturing industry can independently, under control, move towards the high-end.

Key words: global value chain, income distribution, low-end locking, technological competitiveness