A freighter full of containers prepares to leave the port at the Dachanwan port container terminal in Shenzhen, South China's Guangdong Province, on January 21, 2022. Photo: cnsphoto

German and Chinese companies are abandoning Lithuania by relocating their production or sourcing products from elsewhere to avert risks, as the Baltic country's mistake on the Taiwan question continues to spark tension with China and pose risks for global businesses, firms told the Global Times on Wednesday.

Businesses admitted that they had hoped that the Lithuanian government would improve relations with China, but that has changed. In order to reduce their losses, many large companies in Lithuania and other European countries are planning to abandon their businesses in Lithuania and transfer production to other countries, the Global Times learned.

Among businesses that have borne the brunt are Germany-based Klasmann-Deilmann Group, a globally active manufacturer of substrates for professional horticulture, with around 5 percent of the company's output sold to Chinese customers via its local subsidiary Klasmann-Deilmann China.

Usually, Klasmann-Deilmann produces the substrates for Chinese customers in a modern factory in Lithuania. "However, in view of the strained relations between China and Lithuania, we have stopped supplying Lithuanian substrates to China," explained CEO Moritz Böcking in an e-mail sent to the Global Times on Wednesday.

Containers with substrates that have already reached Chinese ports will now be sold to customers in other countries. "We very much regret this step, but we have to react to the situation," Böcking said.

"It serves no one's interests if our substrates lie in the ports for weeks, if horticultural companies in China wait in vain for our products, and if our sales company Klasmann-Deilmann China records losses," he said. 

Böcking also confirmed the statement of his Lithuanian managing director Kazimieras Kaminskas that Klasmann-Deilmann is now moving production for the Chinese market to other European factories.

"We are doing everything to be able to supply our valued Chinese customers as soon as possible," Böcking said, "and likewise we trust that China and Lithuania will soon return to their strong partnership."

In a statement to the Global Times on Tuesday, the German-Baltic Chamber of Commerce said that "as an international trade organization, the chamber actively advocates for the interests of its members and works together with German and Lithuanian companies to find possible solutions to this situation."
 
The chamber refused to comment further on the subject.

Meanwhile, a Shanghai-based manager, who works in the global laser business, told the Global Times on Wednesday on condition of anonymity that the company is reducing trade with the Lithuanian side due to growing concerns posed by the strained bilateral relations.

"We are facing some problems to deliver goods from Lithuania to China… and we are cutting risks by reducing imports from there," the person said.

Since Lithuania blatantly approved the establishment of a so-called "Taiwan Representative Office" in November, its ties with China have deteriorated, inflicting negative impact on the business community as well.

Last week, Lithuanian President Gitanas Nauseda held talks with business executives, who urged him to make an "immediate de-escalation," Reuters reported.

It is within expectations that the impact is expanding to a broader field with more economic, trade and supply chains involved, Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies, told the Global Times on Wednesday.

"Market investment is all about seeking profits and avoiding disadvantages… this is a reflection of the fact that Lithuania's allegation that China is making 'economic coercion' is simply not true, but rather a natural market response," Cui said.

Cui warned that if China-Lithuania relations cannot return to normal in the short term, the economic impact will further intensify.