Country Profile: Lithuania

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Lithuania’s relationship with Beijing deteriorated sharply in 2021 when it decided to withdraw from the China-led 17+1 sub-regional grouping and open a “Taiwan office” in Vilnius. Lithuanian companies have since faced trade barriers, restrictions, and diplomatic pressures, as have its citizens in China. A WTO case against Chinese discriminatory measures is ongoing. The crisis fostered European solidarity and led to the EU’s adoption of an anti-coercion instrument in June 2023. Chinese coercive measures against Lithuania led to domestic and political tensions. Bilateral relations are now at their lowest point, aggravated by China’s “pro-Russian neutrality” position on Russia’s war of aggression against Ukraine, and downgraded bilateral relations.

Economy

Before the 2021 crisis, trade between Lithuania and China had grown steadily for 10 years, though volumes were low. China’s discriminatory measures against Vilnius following its decision to open a “Taiwan representative office” included freezing trade and raising trade barriers. Beijing extended its measures to non-Lithuanian companies selling Lithuanian components in their products. 

The impact of the bilateral crisis on trade relations between the two countries was more important than during China’s Covid-19 shutdowns. These new restrictions also increased Lithuania’s trade deficit with China. Several Lithuanian companies suspended their operations in China in the aftermath and it pushed Lithuania to diversify its trade partnerships. The EU filed a WTO case in January 2022 over China’s discriminatory measures against Lithuania, which is ongoing. 

China was a modest source of investment in Lithuania. Nine Chinese fintech companies were licensed to operate there; they left after 2021. Taiwan responded by launching a EUR 200 million investment fund for projects in Lithuania and a loan program for Lithuanian companies and joint ventures worth EUR 1 billion. The EU and the United States also offered economic support. Taiwan's Industrial Technology Research Institute invested EURs 10 million euros in Lithuanian chipmaker Teltonika to produce chips in Lithuania. 

Politics

Lithuania’s decision to leave the 17+1 sub-regional grouping gathering China and 16 central and eastern European countries (CEEC) in May 2021 triggered departures by other members, notably the other Baltic states. This was the first step into a growing deterioration of bilateral relations. Those got even colder when the “Taiwan representative office” opened in Vilnius in November 2021. It triggered a diplomatic, political, and economic crisis in which both ambassadors were recalled leading to de-facto downgraded bilateral relations. The crisis made Lithuania into a test case for the West on how to build resilience in the case of Chinese economic coercion. It triggered EU solidarity through statements and with other EU leaders engaging the Chinese government on this issue.

In July 2023, Lithuania published its Indo-Pacific strategy, which identifies stronger ties with Taiwan as a strategic priority and part of its economic diversification strategy. Its red lines include China’s military support for Russia’s war of aggression against Ukraine or any change to the status quo in the Taiwan Strait by force. 

Security

Beyond the economic security risks and Lithuania’s efforts to respond to Beijing measures, China is a source of security concerns for Lithuania.

Lithuania’s new government installed in October 2020 took a series of decisions on relations with China in light of national security concerns. They focused on restricting Chinese equipment in telecoms and transportation and postponed a deep-water seaport project. Lithuania has resilient 5G infrastructure built by a partnership Ericsson and a local company over 99 percent of its territory.

While Russia-China military exercises have been conducted on their respective territories, the 2017 military exercise in the Baltic Sea, near NATO territory sparked security concerns for all the three Baltic states. 

Society

Lithuania lacks China expertise. There is no sinology department providing independent language training and China knowledge. A single Confucius Institute provides language training. Universities have 61 agreements with Chinese universities.

The limited Chinese diaspora in Lithuania got smaller after the 2021 crisis. The Lithuanian population in China also shrank, fearing the potential for coercive measures. Public perception is equally revealing: According to PEW, 45 percent of those surveyed had a favorable view of China in 2019. A 2022 government poll found 51 percent of respondents viewed China as an unfriendly country. Yet, only 13 percent supported the governments’ policy on China.

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This MERICS analysis is part of the project “Dealing with a Resurgent China” (DWARC) which has received funding from the European Union’s Horizon Europe research and innovation programme under grant agreement number 101061700.

Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union. Neither the European Union nor the granting authority can be held responsible for them.