Well, I think we'll have to guess a bit because this is not well documented...
First, let's take a look at the GPSvc debug logs:
Enable Group Policy Service (GPSvc) logging
HKEY_LOCAL_MACHINE\Software\Microsoft\Windows NT\CurrentVersion\Diagnostics
DWORD value: GPSvcDebugLevel set to 30002 (Hexadecimal)
and search for Connectivity in the log file. This will give an insight about what's happening.
In this log file, we can also see:
CoCreateInstance for INetworkListManager succeeded
So, I think it's safe to assume that the Network List Manager is used to determine the status of the networks available on the computer. Most importantly, Network List Manager can send notifications to various system components about changes in network connectivity.
Network List Manager can also tell if we are connected to a Domain network.
That being said, I think you may find useful informations in the NlaSvc logs too (Network Location Awareness, related to Network List Manager):
In the Event Viewer -> View -> Show analytic and debug logs. Then:
Applications and Service logs -> Microsoft -> Windows -> NlaSvc -> Diagnostic (right click to Enable this log) and see if you can find useful bits in there. You should be able to see if NLA was able to find a Domain (DsGetDcName).
How does Group Policy determine when the network subsystem is available?
My guess is that the Group Policy Service listens for notifications sent by Network List Manager when Network connectivity changes (network cable plugged/unplugged, Net adapter enabled/disabled, received an IP address, ...), I think Network List Manager / NLA are the ones doing the job to determine if the network provides domain connectivity.