Continental pressured by China to stop using parts from Lithuania, report says

FRANKFURT — China is pressuring Continental 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 the status of Taiwan.

The Chinese government, which views self-ruled Taiwan as its territory, downgraded diplomatic ties with Lithuania last month after the opening of a representative office by Taiwan in Vilnius.

Lithuania’s ruling coalition had also agreed last year to support what it described as “those fighting for freedom” on the island.

Earlier this month, a senior government official and an industry body said China has told multinationals to sever ties with Lithuania or face being shut out of the Chinese market.

Continental ranks No. 6 on the Automotive News Europe list of the top 100 global suppliers, with worldwide sales to automakers of $29.68 billion in 2020. The supplier has production facilities in Lithuania, making electronic parts such as controllers for vehicle doors and seats, and exports to clients globally including China.

Continental declined to comment on whether it had been asked by the Chinese government to cut links with Lithuania.

China’s foreign ministry denied that Beijing had pressured multinational companies not to use Lithuanian-produced parts though said its 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 spokesperson added.

China has pressured countries to downgrade or sever their relations with democratically governed Taiwan.

“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.”

Lithuania’s direct trade with China is modest, but its export-based economy is home to hundreds of companies that make products such as furniture, lasers, food and clothing for multinationals that sell to China.

Lithuania’s foreign office 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,” said the spokesperson, adding that it was “looking for long-term sustainable solutions and ways to resume trade flows with China.”

The European Union said it may take the trade row to the World Trade Organisation (WTO) if it finds evidence that Beijing is violating international trade rules, the bloc’s executive Commission said.

The Commission said it was gathering information to find out what is actually happening, and would then decide on any further actions.

“We’re exploring steps at the WTO and an official complaint to the WTO. Of course, many other steps are theoretically possible,” a spokesperson for the European Commission told reporters in Brussels.

“In order to build a case in the WTO, we need to have enough evidence, so that is actually what we do now,” another spokesperson said, adding the Commission was in touch with the authorities in Lithuania and other members states that could be facing similar problems.