Many Chinese companies ‘will go bankrupt’, if US delivers on tariff threats, court newspaper warns

From the South China Morning Post, July 25:

Judiciary must ready itself for possible fallout from China-US trade row, mouthpiece of Beijing’s top court says

China’s judiciary should prepare itself for a possible spike in the number of corporate bankruptcy cases as a result of the trade dispute between Beijing and Washington, state media warned.

In an opinion piece published on Wednesday by People’s Court Daily, Du Wanhua, deputy director of an advisory committee to the Supreme People’s Court, said that courts needed to be aware of the potential harm the tariff row could cause.

“It’s hard to predict how this trade war will develop and to what extent,” he said. “But one thing is sure: if the US imposes tariffs on Chinese imports following an order of US$60 billion, US$200 billion, or even US$500 billion, many Chinese companies will go bankrupt.”

As Chinese courts have yet to have any involvement in the trade dispute, the fact that the newspaper of the nation’s top court, ran an opinion piece – for a judiciary-only readership – suggests concerns might be rising in Beijing about the possible socioeconomic implications of the row.

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Du said the judiciary should also quickly familiarise itself with the possible complexities of such cases, which are probably unlike those they have handled in the past.

“Preparedness ensures success. Unpreparedness spells failure,” he said. “Our courts need to look into these possible Chinese corporate bankruptcies as early as possible.”

The world’s two largest economies have so far imposed 25 per cent tariffs on US$34 billion worth of each other’s imports, with reciprocal duties on a further US$16 billion of goods expected to take effect soon.

Washington has also threatened to impose 10 per cent tariffs on an additional US$200 billion of Chinese imports, with Beijing saying it would counter with “qualitative and quantitative measures”.

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The tit-for-tat dispute escalated against last week when US President Donald Trump said he was prepared to add tariffs to almost all Chinese imports, or about US$500 billion worth of goods based on last year’s trade.

A spokesman for the Chinese foreign ministry said on Monday that threats and intimidation would never work.

While Beijing has not published any forecasts for how the trade dispute might affect China’s export companies, jobs or the economy, the commerce ministry said it was monitoring the situation “on a continuous basis”....MORE