Taiwan to support Lithuania with $200m fund after dispute with China

Taiwan is setting up a $200m fund to invest in Lithuania and is aiming to take as many of the Baltic country’s goods banned by China as possible, as Taipei tries to reward Vilnius for its diplomatic support.

Eric Huang, head of Taiwan’s representative office in Lithuania, said on Wednesday that it was hoping to make its first investment later this year with the money guaranteed by its national development fund. “It’s time for us to help with your difficulties,” Harry Ho-jen Tseng, Taiwan’s deputy foreign minister, told Lithuania.

Vilnius last year agreed to let Taiwan open a representative office — a de facto embassy — in its own name, rather than under the name of its capital Taipei as many other European countries have done. Beijing, which claims Taiwan as part of China and tries to force other governments to treat it as such, has since unleashed a wave of diplomatic and economic punishments against Vilnius.

Beijing withdrew its ambassador from Vilnius, banned Lithuanian imports and put pressure on foreign manufacturers to stop using Lithuanian components. The Baltic country was also forced to evacuate its remaining diplomats from China over fears for their safety.

Whether Lithuania stands firm and whether it receives the full backing from other EU member states have become test cases for how effective China’s economic and political coercion tactics can be.

Lithuania’s president Gitanas Nauseda recently reversed his earlier stance and said it had been a “mistake” to let the representative office be in Taiwan’s name, not Taipei’s. He also complained the decision had not been co-ordinated with him by the government, led by Prime Minister Ingrida Simonyte, who he defeated in 2019’s presidential elections.

The spat has led officials to fret that Lithuania’s message risked being diluted as the president represents the country at EU summits and often takes the lead on foreign policy issues.

Simonyte said on Wednesday that she was “disappointed” with Nauseda’s comments and that he had endorsed the moves for months since its announcement.

Radvile Morkunaite-Mikuleniene, vice-chair of Lithuania’s parliament and deputy head of the governing Homeland Union party, told the Financial Times on Wednesday that the government was sticking to its guns and would not change the name of the representative office.

“It is important for the international community to understand what is the position on foreign affairs. We are not withdrawing from our position,” she said.

Lithuania has been shocked by the strength of China’s reaction. Not only has it stopped Lithuanian imports, but it has also put pressure on other European manufacturers such as German car parts maker Continental not to use Lithuanian components in its Chinese operations.

Building economic ties has been a major focus for Taipei since it started expanding relations with Lithuania last year. Kung Ming-hsin, minister of the National Development Council which oversees the national development fund, led a delegation to Lithuania in late October and said he expected the country to become a focal point of Taipei’s pivot to central and eastern Europe.

But in the face of China’s punitive measures, Taipei feels compelled to make up for some of the economic damage Vilnius is suffering. “Originally, this had nothing to do with a competition between us and Beijing, and it should not be a zero-sum game,” said a senior Taiwanese government official.

A senior Taiwanese foreign policy official said: “We want to ensure that China’s economic coercion against Lithuania will be offset by our effort in trade and investment.”

On Monday, state-owned Taiwan Tobacco and Liquor Corporation snapped up a shipment of 24,000 bottles of Lithuanian rum that had been rejected by Chinese customs. Huang said on Wednesday that Taiwan had taken 120 shipping containers of Lithuanian exports blocked by China.

The Taiwanese representative said he expected the priority investment areas for the new fund to include semiconductors, lasers and biotechnology. Taiwan has previously also identified financial technology as a possible area of co-operation, and Vilnius has more regulated fintech companies than any other EU country.