This study investigates the earnings management of Chinese central state-owned enterprises (CSOEs) from the perspective of an extended alignment effect. The argument of alignment effect suggests that when the controlling shareholder of a firm is sufficiently large, the controlling shareholder’s interests will be closely aligned with the firm’s interests. The close alignment between the interests of the controlling shareholder and those of the firm could affect the firms’ earnings management behavior (Shleifer and Vishny 1986). Alignment effects are stronger in countries with weaker legal and institutional environments such as China (Ding, Zhang, and Zhang 2007). We extend the alignment effect to argue that the close alignment between the interests of Chinese CSOEs and those of their state owner could induce state-level incentives for CSOEs to manage earnings. State-owned enterprises (SOEs) have traditionally been dominant forms of business in China. Although traditional SOEs have declined significantly in both number and importance in China, Chinese CSOEs, a new type of Chinese SOE, have become more important in the Chinese economy. Chinese CSOEs are over-sized and well-funded national-champion conglomerates that monopolize strategic industries domestically and that compete aggressively in investment and acquisitions arenas internationally. The Chinese central government maintains close control of the Chinese CSOEs, not only by controlling shareholdings but also through its supervisory authority and policy-making power (Lin and Milhaupt 2013). We argue that the Chinese central government’s control over Chinese CSOEs gives rise to state-level earnings management incentives. One of the Chinese government’s greatest achievements has been its initiation of unprecedented economic growth while maintaining stability. Therefore, we posit that state-level incentives motivate Chinese CSOEs to engage in earnings management to mitigate GDP volatility, allowing the Chinese population to feel more stable and secure.