China fears bankruptcies of major firms due to Donald Trump’s actions

BEIJING: A senior Chinese government official predicted on Thursday that aggressive trade actions imposed by US President Donald Trump would result in bankruptcy for many Chinese companies if immediate measures were not taken to check the fallout.

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

Trump has imposed a heavy 25% duty on Chinese exports worth $34 billion and has threatened a 10% duty increase on another set of exports worth $200 billion. Washington sees it as an effort to counter the high trade deficit caused by Chinese exports by making them dearer in the US.


China has taken some retaliatory steps but many Chinese intellectuals are not happy with the official response to a situation that might be heading towards a trade war.

Du said the judiciary must be prepared to face bankruptcy-related cases and deal with complexities it has not handled earlier. “Preparedness ensures success. Unpreparedness spells failure,” he said. “Our courts need to look into these possible Chinese corporate bankruptcies as early as possible.”

Curiously, the strong response comes from a Communist Party official connected to the Supreme Court who expressed his views in an article in the People’s Daily, the party’s official organ. It did not come from someone linked to the economic ministries.

On Tuesday, Huang Libin, a spokesman for the ministry of industry and information technology, had said there had yet to be any significant impact on industrial output.

“We hear complaints from (Chinese) companies that US clients have requested a suspension of orders and deliveries, but so far it has had only a limited impact on the industrial sector,” he said.

Bankruptcy cases created by the trade dispute would be very different from those involving the liquidation of “zombie” companies as several of the firms at risk were promising hi-tech companies. The term “zombie” is widely used for underproductive and outmoded state-owned giants.