Analysis of the Motivations and Economic Effect of Centrallocal State-owned Enterprise Restructuring in China

Purpose - In the context of increasing globalization and regional economic integration, mergers and acquisitions (M&As) and reorganizations have emerged as crucial strategies for enhancing corporate competitiveness and optimizing resource allocation. This study uses the case of Aluminum Corporation of China Limited (CHALCO)’s acquisition of Yunnan Aluminum Co., Ltd. (YUNAL) to explore the motivations behind central-local restructuring and its economic effects on corporate competitiveness and local economies. Design/Methodology/Approach - This study employs a case study approach to provide a comprehensive analysis of CHALCO’s acquisition of YUNAL. By integrating macroeconomic conditions with internal corporate data, this study examines the motivations behind and the economic impacts of central-local restructuring. Research methods encompass case analysis and comparisons of Economic Value Added (EVA) and various financial indicators. Findings - The study finds that the main motivations for central-local restructuring include the rigid growth of national fiscal expenditure, local governments increasing fiscal revenue through revitalizing land and corporate assets, and central SOEs’ scale advantages in monopolistic and resource-based sectors. During the restructuring process, local SOE management teams actively cooperate for three main reasons: to gain higher positions and compensation; to benefit from central SOEs’ financial and technical support in overcoming development bottlenecks; and to have greater opportunities to demonstrate their management capabilities. Research Implications - The significance of this study lies in its use of a specific case analysis to demonstrate the positive impacts of restructuring state-owned enterprises (SOEs) at the central and local levels on corporate and local economic development. It provides valuable insights for policymakers and corporate managers, facilitating the advancement of state-owned enterprise reform and the optimization of resource allocation. Furthermore, the findings enhance our understanding of the valuation system within the context of socialism with Chinese characteristics and foster improved collaborative development between central and local stateowned enterprises (SOEs).