German business hits out at China after Lithuania trade row snares exports

Germany’s powerful business lobby has lashed out at China after the communist country blocked imports from German manufacturers in Lithuania.

The BDI accused Beijing of a “devastating own goal” after companies from other EU member states were caught by China’s decision to ban imports from the Baltic country.

“The latest measures China has adopted against Lithuania amount to a trade boycott that will impact the whole of the EU,” it said. “Imports from China, which are needed in German manufacturing facilities in Lithuania, are also being affected, as are exports from Germany to China which contain Lithuanian components.”

“In the long term, the escalation by China is a devastating own goal. It shows that China is prepared to decouple economically from “politically undesirable” partners. It’s clear to the BDI that any damage to the value chains that are at the heart of the EU single market, is not to be tolerated.”

However, in a swipe at Lithuania for bolstering ties with Taiwan, a move that precipitated the crisis, it criticised individual states that were “out of step” with EU policy. China is Germany’s biggest trading partner, with €213bn in goods exchanged in 2020.

“It remains important to maintain economic relations with China on a high level,” the BDI said. Its statement will add to pressure on Berlin to intervene diplomatically.

Continental, the German blue-chip auto parts supplier, is among the companies to have had exports blocked by customs authorities in China, according to people familiar with the matter. The company makes telematic control units at a factory in the Lithuanian city of Kaunas.

China blocked all imports from Lithuania earlier this month, after the Baltic state allowed Taiwan to open a de facto consulate in its capital Vilnius. Beijing, which considers Taiwan to be part of China, also suspended its consular services in Lithuania. Vilnius pulled its diplomats out of China over concerns for their safety.

But China’s import ban targeted at Lithuania is now beginning to hurt foreign companies who established manufacturing facilities in the low-cost country.

Lithuanian officials met the European Commission on Friday, an industry representative in the country told the Financial Times.

The EU is preparing a legal case at the World Trade Organization, which could take months.

Continental, which has operations in 58 countries, is considering shipping products from Lithuania via other countries, one person said, in order to avoid further the Chinese blockade. The company declined to comment.

Hella, another German supplier with a large plant in Lithuania, has also encountered difficulties with exports to China, according to one industry representative, as have smaller companies with operations in the country. Hella did not immediately respond to requests for comment.

A spokeswoman for the German economy ministry said it was aware of the difficulties encountered by Continental and was “concerned” by developments, but did not elaborate on the coalition government’s plans.

Florian Schröder, the managing director of the German-Baltic Chamber of Commerce, said several German companies had been seeking advice from the body after having trouble importing or exporting products.

We have been working hard for the past 5 years to establish a small automotive supplier cluster,” he told the FT.

“Now things have escalated and many German and Lithuanian companies are affected.”

Chinese officials have denied ordering any action, but told the EU that private logistics companies and importers might be avoiding Lithuanian goods in anger over its links with Taiwan.

Brussels is collecting evidence but many companies fear that if they complain they will be shut out of China completely.

Additional reporting by Richard Milne in Oslo

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