China takes Lithuania as an economic hostage
Beijing has developed a reputation for blocking imports from countries it wants to punish. Australian wine became a target last year. Now China is punching back at Lithuania, which recently allowed Taiwan to open a representative office in Vilnius. But here’s the new twist: China is holding up not only Lithuanian imports, but all imports that include Lithuanian parts. The effects are rippling across Europe.
In 2020 Lithuania exported goods worth $350 million to China—an increase over previous years but peanuts in overall trade. Lithuania has long imported far more from China than vice versa; last year, about four times as much. So Lithuania’s government perhaps calculated that the country’s economy could handle whatever retaliation China inflicted for the gesture to Taiwan.
But the Lithuanians probably didn’t anticipate a Chinese attack on global supply chains. “We now know of many cases where imports from Lithuania and the EU are blocked in Chinese ports, and the number is increasing every day,” Valdis Dombrovskis, the European Union’s trade commissioner, told Germany’s Die Welt newspaper shortly before Christmas. “Apparently the Chinese customs authority doesn’t process goods from other EU member states if they contain parts made in Lithuania.”
Chinese Foreign Ministry spokesman Zhao Lijian has denied that Beijing is blocking imports containing Lithuanian components, but goods are still stuck or severely delayed, with volumes growing rapidly. German automotive suppliers have said their cargo is languishing in Chinese ports.
China’s suspension of salmon imports from Norway after a Chinese dissident was awarded the Nobel Peace Prize, and of Australian wine after Canberra called for an investigation into the origins of Covid-19, were serious but harmed only those countries. Targeting global supply chains to punish a country is an extremely potent weapon. It’s one that China—a power player in the global economy—can deploy in ways that the Soviet Union never could.
The punishment “is putting multinational companies under pressure. Now they’re trying to push the Lithuanian government to rename the Taiwanese office,” Vidmantas Janulevicius, president of Lithuania’s industrialists’ association and chairman of the solar-panel manufacturer BOD Group, told me