China-Lithuania tension: German firms may have to shut factories in Baltic state amid Beijing retaliation

China denies it is targeting multinational companies to discourage them from using Lithuanian-produced parts, but business groups report a ‘trade boycott’

German industries group warns it could be a ‘devastating own goal’ that shows China is willing to decouple itself economically from politically disagreeable partners

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The Continental factory in Kaunas, Lithuania is pictured on December 17, 2021. As German firms consider closing factories in Lithuania, business groups in Europe say Beijing is effectively conducting a “trade boycott with repercussions throughout the EU”. Photo: Reuters

Teddy NgandKinling Lo

Published: 6:00am, 25 Dec 2021Updated: 7:02am, 25 Dec 2021

German businesses have warned that China’s attempts to target Lithuania over its relationship with Taiwan could be a “devastating own goal” as it forces decoupling on “politically disagreeable” partners.

Beijing has denied that it is targeting multinational companies to discourage them from using Lithuanian-produced parts, but business groups said Beijing was carrying out a “trade boycott with repercussions throughout the EU” and warned that German firms may be forced to close manufacturing operations in Lithuania.

Ties between the Baltic state and China plunged after Taiwan set up a representative office in Vilnius. Beijing – which opposes Taiwan having official ties with other nations because it sees the island as a breakaway province – said the move violated the one China policy – an allegation the European Union disagrees with.

02:17

‘One China’ explained

Since then, European businesses have accused Beijing of blocking imports from Lithuania while reports suggested China was pressuring other companies, such as German car manufacturer Continental, to stop using components made in Lithuania.

The German-Baltic Chamber of Commerce warned the Lithuanian government in a letter that German investors might need to close their facilities in Lithuania unless there was “a constructive solution to restore Lithuanian-Chinese economic relations”, Lithuanian news website LRT reported.

Companies involved in peat, lasers, car parts and hi-tech sectors faced difficulties, the letter said.

“We cannot continue investment projects (product expansion), as we no longer receive necessary components from China. We are no longer able to import parts needed for production from China. We cannot export finished products (with Lithuania as a country of origin) to China”.