Lithuania's exports to China suffered a near-total collapse in December, amid a blazing row over the Baltic state's support for Taiwan.

Chinese government customs data released on Thursday showed shipments from Lithuania to China dropped by 91.4 per cent last month from a year earlier.

Compared to November 2021, the drop was 91.1 per cent, offering factual evidence to support Lithuanian exporters' complaints that they have been frozen out of the Chinese market in recent weeks.

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The dispute centres on Lithuania's decision to host a controversially named diplomatic mission from the self-ruled Taiwan, which Beijing regards as part of its territory. Such presences are commonly called Taipei Representative Offices.

Beijing reacted with fury when the Taiwanese Representative Office opened in Vilnius in November and soon afterwards businesses said Lithuania had been wiped from the Chinese customs system, meaning they were unable to fulfil shipments.

Just US$3.8 million worth of Lithuanian goods entered Chinese ports last month, compared to US$43.1 million a year earlier, or US$42.8 million just a month prior.

Sectors crucial to the Lithuanian economy faced total obliteration from the Chinese market, including unwrought copper-zinc alloy, the top export a year earlier, and wood products such as fir, another top five export. Others faced a virtual wipeout.

Sales of hi-tech lasers, the No 2 export in December 2020, fell by 95 per cent to just US$308,418, diagnostic reagents by 98 per cent, while peat shipments – important to Lithuania's agricultural sector – tumbled by 92 per cent.

The controversially named Taiwanese Representative Office in Vilnius, Lithuania. Photo: Reuters alt=The controversially named Taiwanese Representative Office in Vilnius, Lithuania. Photo: Reuters>

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At the same time, Chinese exports to Lithuania boomed, rising 27.1 per cent from a year earlier.

According to EU sources, Beijing continues to deny a coordinated campaign, instead saying that businesses have decided not to buy goods from countries that have "attacked China's sovereignty".

The Chinese government says Lithuania is in breach of the EU's one-China policy, a charge vehemently denied by both Vilnius and Brussels.

The situation has evolved since before Christmas, when the customs authority in Beijing initially refused to meet EU officials in the capital because it was "too busy" dealing with the coronavirus pandemic. It subsequently directed the diplomats to the respective local Chinese port authorities.

Lithuanians overwhelmingly oppose Vilnius' policy on China, poll shows

Meanwhile, Lithuania's President Gitanas Nauseda has said the naming of the Taiwanese office was a "mistake", while government-mandated public opinion polls suggested Lithuania's China policy was overwhelmingly unpopular.

Vidmantas Janulevicius, president of the Lithuanian Confederation of Industrialists, said the situation has not improved.

"Companies are trying to receive money back or to receive their goods back which have been sent before and which have still stayed under customs clearance," he said, adding that the data tallies with the anecdotal evidence he has gleaned from his members.

Lithuania is among the EU nations least dependent on trade with China, a fact often used to explain the government's aggressive stance towards Beijing.

However, the complex European supply chain has seen other countries become entangled in the dispute, with the EU gathering evidence for a potential World Trade Organization (WTO) case against China.

Companies from Germany, France, and Sweden are among those to have reported having goods being stopped at Chinese ports because they contain parts made in Lithuania, creating headaches for authorities in Brussels and other capitals across the bloc.

While the EU has backed Vilnius rhetorically, it has few avenues of action it can take to address China's alleged coercion.

Businesses are reluctant to provide evidence for a potential WTO suit for fear of being frozen out of the Chinese market, sources said, suggesting that if Beijing is attempting to muzzle criticism, it has achieved some modicum of success.

Taiwanese firm buys Lithuanian rum destined for mainland China amid row

Brussels is developing an anti-coercion instrument, a powerful trade weapon that could see countries accused of economic bullying frozen out of lucrative European markets, but this is not expected to be ready for months, or even years.

The French government, which took on the six-month presidency of the European Council this month, has vowed to accelerate the tool's development.

"We criticise the coercion by China. As you know, there is an anti-coercion system on the table and part of our response under the French presidency will be to speed up the text so that coercive measures by China in relation to Lithuania cease," France's foreign minister Jean-Yves Le Drian said last week.

On Tuesday, European lawmakers urged the bloc to take firm action against China, or face further coercion from Beijing.

Back Lithuania or face more Chinese coercion, lawmakers tell EU chiefs

In a letter to EU chiefs, a group of 41 lawmakers said inaction will "allow [the] PRC to weaken EU unity and intensify 'divide and rule' practices among the EU member states as well as seek to diminish the EU's role globally".

Slovenian Prime Minister Janez Jansa this week said the country was in talks with Taipei over exchanging diplomatic offices. He heaped praise on Taiwan, while slamming China, earning a stern rebuke from Beijing in response.

"They are a democratic country. It's difficult to listen to a capital with a one-party system lecturing about democracy and peace around the world. You know, a country which is democratic and respects all international democratic standards, international law included," Jansa said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.

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