China is pressuring German vehicle parts giant Continental AG to stop using components made in Lithuania, two people familiar with the matter told Reuters, amid a dispute between Beijing and the Baltic state over Taipei setting up a representative office bearing the name “Taiwan” in Vilnius.
The targeting of Continental is an example of how the China-Lithuania diplomatic spat is spilling over into business in an era of global supply chains and affecting Germany’s vehicle industry, a lucrative pillar of Europe’s biggest economy.
The Chinese government last month downgraded diplomatic ties with Lithuania after the opening of the Taiwanese Representative Office in Lithuania.
Lithuania’s ruling coalition last year also agreed to support what it described as “those fighting for freedom” in Taiwan.
Continental, one of the world’s largest vehicle parts makers, has production facilities in Lithuania, making electronic parts such as controllers for vehicle doors and seats, and exports to clients globally including China.
German industry sources said that the pressure was not only being felt by Continental, but up to a dozen companies, mainly from the automotive and agricultural sectors, they said.
Continental, which supplies all of Germany’s big automakers, declined to comment on whether it had been asked by Beijing to cut links with Lithuania.
The Chinese Ministry of Foreign Affairs denied that Beijing had pressured multinational companies not to use Lithuanian-produced parts, but said that Chinese companies no longer trusted Lithuania.
“The practice of ‘one China, one Taiwan’ grossly interferes in China’s internal affairs and seriously violates China’s core interests,” a ministry spokesperson added.
“I heard that many Chinese companies no longer regard Lithuania as a trustworthy partner,” the spokesperson said. “Lithuania has to look at itself for the reason why Lithuanian companies are facing difficulties in trade and economic cooperation in China.”
Beijing has pressured countries to downgrade or sever their relations with Taiwan.
Earlier this month, a senior official and an industry body said that China had told multinationals to sever ties with Lithuania or face being shut out of the Chinese market.
Lithuania’s direct trade with China is modest, but its export-based economy is home to hundreds of firms that make products such as furniture, lasers, food and clothing for multinationals that sell to China.
The Lithuanian Ministry of Foreign Affairs said: “Companies operating in Lithuania have successfully integrated themselves into international supply chains, so China’s economic pressure measures may cause various disruptions to companies operating in Lithuania.”
“We closely monitor, analyze and evaluate each such case, including among these German companies,” the ministry said, adding that it was “looking for long-term sustainable solutions and ways to resume trade flows with China.”
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