Unlocking Common Prosperity Through Global Value Chain Embedding: Evidence from China on Urban–Rural Inequality and Sustainable Development

In the context of globalization, balancing economic growth with social equity is a critical challenge for achieving sustainable development. While Global Value Chains (GVCs) have become a defining feature of the contemporary economy, their specific impact on the urban–rural income gap—a key indicator of common prosperity—remains under-explored. This study empirically investigates the impact of GVC embedding on urban–rural common prosperity in China using panel data from 30 provinces spanning the period 2011–2022. Adopting a dual perspective of “efficiency” (income growth) and “equity” (income distribution), this study constructs a mediation model to analyze the transmission mechanisms. Research indicates that embedding in global value chains not only enhances the income-generating capacity of urban and rural residents but also effectively narrows the urban–rural income gap. Furthermore, its positive contribution to urban–rural common prosperity is both long-term and sustainable. This effect of GVC embedding on urban–rural common prosperity remains significant after conducting various robustness tests. Mechanism analyses reveal that GVC embedding achieves these outcomes by promoting agricultural industrial upgrading, fostering agricultural technological innovation, and stimulating rural entrepreneurial vitality. Notably, heterogeneity tests indicate that these positive effects are more pronounced in eastern, coastal, and economically developed regions, whereas the impact is less evident in central, western, and inland areas. This study holds important policy implications for promoting the development of China’s open economy to a higher level in the era of economic globalization, as well as for realizing urban–rural common prosperity and balanced, sustainable development.