During the US-China trade war, China’s state companies started buying up dying private firms just to keep people employed, not for profit.
March 30, 2026
Original Paper
The Trade War Shocks and SOE's M&A as Local Bailouts: Evidence from China
SSRN · 6487389
The Takeaway
This reveals that state-owned enterprises (SOEs) function as a hidden social safety net, absorbing the shocks of international trade disputes. While these acquisitions helped local governments meet employment targets, they significantly increased the long-term financial risk and operating fragility of the acquiring state companies.
From the abstract
The trade war between U.S. and China is a vital and unexpected shock for Chinese firms, especially for private firms. This study examines the association between Chinese SOEs’ M&A decisions targeting private firms and trade-war shocks, offering a novel perspective on the Chinese government’s responses to trade-war shocks. Utilizing a comprehensive dataset of Chinese firms spanning from 2015 to 2021, we find that the trade war shocks dispute significantly increased the frequency of local acquisit