13 min read — Research Paper | Lithuania | China | Taiwan | Geopolitics
Precedent-setter or Pawn? The Chinese-Lithuanian Dispute Over Taiwan’s Representative Office
Introduction
Few international issues attract more attention globally than Taiwan’s fate. The Chinese Communist Party (CCP) is unambiguous in its resolve to reunify the Chinese nation. During his address at a state banquet celebrating the 75th birthday of Communist China Xi Jinping did not rule out using military means to achieve the reunification of the motherland, should that be necessary.1 Throughout his term in office, Joe Biden has continually pledged to defend the island, albeit the US’s official policy could be best described as strategically ambiguous.2 In light of China’s seemingly perpetual economic growth, the de facto consensus in the international community was to avoid triggering the mainland on political issues, i.e. following the One China principle, while maintaining business relations with both countries across the strait. Thus, the opening of the Taiwanese Representative Office in Vilnius in November 2021 bewildered the international community. The standard practice had been to use ‘Taipei’ for Taiwanese representative offices, to avoid stepping on China’s red lines.
This essay investigates the diverging Chinese and Lithuanian approaches to the event. The paper aims to analyse the Chinese take, and the methods used by the CCP to pressure Lithuania and its allies into backtracking. Moreover, alliance theory will help understand why the Lithuanian government saw the move as rational. After that, a matrix of four possible future scenarios will be presented, building on two axes, one identifying the level of Chinese-EU economic integration, and the other, whether Lithuania’s manoeuvre remains an isolated incident or if more countries follow suit.
Background
Cooperation intensified through the Chinese 17+1 initiative to promote the Belt and Road Initiative (BRI) in Central and Eastern Europe (CEE). However, Chinese-Lithuanian relations were far from warm. Lithuania joined the semi-concerted European effort to restrict Chinese 5G providers over spying concerns, questioned Hong Kong’s elections, and condemned Chinese human rights abuses in Xinjiang.3 These actions, standard in the West, failed to draw the CCP’s attention. The opening of the Taiwanese Representative Office in Vilnius, however, resulted in immediate economic sanctions from China: Lithuanian goods were held in Chinese ports as licenses were cancelled. Most strikingly, China recalled its ambassador to Lithuania and demanded Vilnius do the same. Beijing interpreted the opening as an ‘egregious precedent’ and vowed to safeguard China’s sovereignty.4
However, Beijing went further in its attempt to make an example out of Lithuania. Not only were multinational companies such as Continental pressured to close factories in Lithuania, but China also blocked goods from major European exporters, such as France or Germany, if their products contained Lithuanian parts, a move that irritated the European capitals and led them to pressure Lithuania to negotiate.5 The issue’s saliency to Beijing was illustrated by accusing Lithuania of attempting to ‘kidnap EU-China relations’.6 China’s export-oriented economy would be severely handicapped should it lose the European market. As the growth of US-China trade since 2016 has been stalling or occasionally even reversing, maintaining the EU’s large consumer base is vital for Beijing’s global aspirations7. Economic growth aside, Chinese business relations in Europe serve as a crucial political leverage and bargaining pressure tool in the old continent, the Continental example being a case in point.
International Relations literature on small and middle-sized status-seeking strategies suggests, that small states can acquire status via creative means: changing socially approved dimensions and even challenging great powers.8 In this sense, small states engaging in creative diplomacy can act as ‘moral’ powers, seeking recognition by the hegemon. Indeed, the Lithuanian government sensed that the US was shifting its centre of attention away from Europe to the South China Sea. Lithuania’s attempt to attract its security guarantor’s attention was successful. Shortly after the incident, Lithuanian ministers of defence and foreign affairs met with their American counterparts and the American military presence in the country increased.9 Moreover, Lithuania was invited to the Indo-Pacific Dialogue, organised by the US presidential administration, this was followed by the signing of the landmark Strategic Partnership between Lithuania and Japan.10
Beijing interpreted the incident as being choreographed by the US. Chinese analysts claim that the American intention was to allow small European countries to break the taboo while providing diplomatic and financial resources for the fight.11 Joe Biden’s administration was also accused of trying to ‘internationalise’ the Taiwan issue, by creating a likely-minded team of allies that could be used in the international arena. Lithuania’s bald move may also have stemmed from rational economic calculations. Despite the 17+1 framework, the Baltic States received minimal Chinese investment, and Lithuania’s trade balance with China remained negative.12 Exports were insignificant, making severing ties and seeking Taiwanese investment a logical step. Chinese analysts noted these trade deficits and unmet expectations as potential drivers for CEE countries to pursue value diplomacy.13
Scenarios
The following section presents a matrix containing four possible scenarios based on two axes representing political and economic factors.
The horizontal axis provides a useful metric for analysing EU-China relations. Beijing can’t do without the European market and a continued policy of economic decoupling would seriously impede the Chinese global ambitions.14 The left end of the axis implies a reversal of current EU efforts to raise tariffs and become less dependent on Chinese industry and rare earth minerals. The right end represents a continuation and speed up of current economic decoupling.
The vertical axis identifies two possible future developments regarding the international political engagement with Taiwan. The low end of the axis paints a picture in which the use of the name ‘Taiwan’ in representative offices, suggesting the island’s independent foreign policy, remains a one-time incident. The opposite side of the axis draws a scenario in which more European states grow politically closer to the island, undermining the One China principle and normalising the use of the name ‘Taiwan’ in their representative offices.
Combining the two axes produces four distinct scenarios that help analyse the state and level of the Chinese-European political and economic engagement.
Goliath undisturbed
In this scenario, the Lithuanian move remains an isolated incident, and the current trend of EU-China economic decoupling is reversed. This outcome would be ideal for Beijing; the political and economic pressure proves to be sufficient for other countries to avoid similar adventures. Such a scenario is not completely unlikely, as currently, no EU member state appears to be prepared to follow Lithuania’s example. However, reversing the current trend of EU-China economic decoupling would require a substantial shift in the political will of the EU member states.
One China, one Taiwan
Lithuania creates a precedent; the taboo is broken. European countries develop political ties with Taiwan while intensifying trade with the mainland. This scenario seems least likely as Beijing would probably exhaust all (economic) tools before settling. The first EU countries to follow Lithuania’s example would likely be the Czech Republic or Slovakia, as they have recently increased diplomatic engagement with Taiwan. In this scenario, the European heavyweights such as Germany and France would increase trade with China whilst the CEE region attempts to draw the US’s attention by engaging in ‘value diplomacy’.
A pawn moves the board
Lithuania increases its international status as a moral power as it begins a trend. Current European dependencies on China’s materials and industries make this scenario unlikely. Although the current trend of EU-China decoupling should continue, serious diplomatic engagement with Taiwan within the EU is likely more possible in the long, rather than short or medium terms.
Strategic diplomacy
I propose strategic diplomacy as the most likely scenario for the following two decades.
The Taiwanese Office in Lithuania remains an isolated incident as other European states fear backlash from China. Beijing doubles down on its efforts to isolate Lithuania diplomatically by employing sharp power methods; One China principle issues are raised during multilateral negotiations between the EU and China, and domestic opposition to policies directed against China receives Beijing’s attention and support. Scare tactics are used to deter like-minded states from supporting Lithuania; China takes advantage of increasingly warmer ties with Russia to pressure Lithuania indirectly, the current discourse of possible Russian-Chinese cooperation to punish Lithuania is maintained and gradually increases in intensity.15
Given a continued economic EU-China decoupling is expected in this scenario, it would seem logical to expect growth of diplomatic support for Lithuanian efforts from EU states as Beijing’s tools of economic coercion become weaker. However, even as the EU continues raising tariffs on Chinese goods, most European states remain dependent on China for critical materials and consumer goods. Economic decoupling is a slow process, new European industries take time to develop, and Beijing makes good use of its remaining economic bargaining power. Chinese rare earth minerals, green technology components, and industrial metals are vital for the European green transition and industry, China uses them as leverage. Giving some states (e.g. Hungary, Greece) preferential treatment, and limiting market access to others, Beijing escalates divisions within the EU, making a coordinated response harder to reach.
European heavyweights like France and Germany increasingly support EU-China policy independent of the US. While they are determined to become less dependent on China’s end of the supply chain, Lithuanian pro-American adventures receive little support. The memories of European goods being blocked due to having Lithuanian components are still fresh, and export-oriented countries dissuade EEC countries from following Lithuania’s example.
Conclusion
The analysis demonstrates the interconnectedness of the economic and political realms of the matter. Being comparatively less dependent on trade with China, Lithuania exploited the opportunity to attract the attention of its strategic partner when Washington gradually shifted its attention from Europe to Southeast Asia. Pointing to parallels of the predicament that Taiwan is facing to the political circumstances that Lithuania was under in the 20th century, Vilnius engaged in strategic diplomacy attempting to increase its international status as a moral and pro-democratic force. Beijing sensed the danger of this development, vowing to defend China’s sovereignty. Chinese diplomats and media interpreted the situation as an attempt by the US to weaken China’s geopolitical standing and undermine the One China principle. Basing the four possible future scenarios on economic and political factors, this work proposes Strategic diplomacy as the most likely one. Albeit decreasing in scope, European states’ dependence on China’s industry and raw materials prevents like-minded states from following Lithuania’s example. The current expected trend of EU-China economic decoupling continues, but the existing interconnectedness of the two markets does not allow for quick disengagement.
1 Gan, N. (2024, October). Xi vows “reunification” with Taiwan on eve of Communist China’s 75th birthday. CNN. https://edition.cnn.com/2024/10/01/china/china-xi-reunification-taiwan-national-day-intl-hnk/index.html
2 Kuo, R. (2023, January 18). “Strategic Ambiguity” Has the U.S. and Taiwan Trapped. Foreign Policy. https://foreignpolicy.com/2023/01/18/taiwan-us-china-strategic-ambiguity-military-strategy-asymmetric-defense-invasion/
3 Lust, A. (2024). In Dire Straits: The Baltic States between Mainland China and Taiwan. Asian Perspective, 48(2), 351–378.
4 Wong, C. (2021). China downgrades ties with Lithuania amid Taiwan row; Foreign ministry warns de facto embassy creates the false impression of “one China, one Taiwan.” South China Morning Post, 1-.
5 Bermingham, F. (2022). Brussels launches WTO case against China over Lithuania; As row over Taiwan office continues, Europe says it has evidence of alleged embargo of businesses. South China Morning Post.
6 Ibid.
7 Siripurapu, A., & Berman, N. (2024, May 14). The Contentious US-China Trade Relationship. Council on Foreign Relations. https://www.cfr.org/backgrounder/contentious-us-china-trade-relationship
8 Wohlforth, W. C., de Carvalho, B., Leira, H., & Neumann, I. B. (2018). Moral authority and status in International Relations: Good states and the social dimension of status seeking. Review of International Studies, 44(3), 526–546.
9 Lust, A. (2024). In Dire Straits: The Baltic States between Mainland China and Taiwan. Asian Perspective, 48(2), 351–378.
10 Švedkauskas, Ž. (2024). A Newfound Hub of Global Democracy Promotion: Lithuania Playing to its Strengths. Alternatives: Global, Local, Political, 49(2), 155–169.
11 曹群 (Cao Qun). “The Taiwan Strait Game Between China and the United States: Risk Variables and Crisis Management [中美台海博弈的风险变数和危机管控]”. CSIS Interpret: China, original work published in Asia- Pacific Security and Maritime Affairs [亚太安全与海洋研究], May 13, 2022
12 Lust, A. (2024). In Dire Straits: The Baltic States between Mainland China and Taiwan. Asian Perspective, 48(2), 351–378.
13 复旦欧洲观察 (Fudan Europe Watch). “The 10th Anniversary of Cooperation Between China and Central and Eastern Europe: How to Continue to Maintain Steady Progress in the Future [中国与中东欧合作十周年：未来如何持续行稳致远]”. CSIS Interpret: China, original work published in The Paper [澎湃], July 2, 2022
14 复旦欧洲观察 (Fudan Europe Watch). “Improving Sino-European Relations Is Just as Important as Preventing “Sino-U.S. Relations From Spiraling Out of Control” [搞好中欧关系，与防止“中美竞争失控”一样重要]”. CSIS Interpret: China, original work published in Fudan Development Institute [复旦发展研究院], June 1, 2022
15 Boruta, R. (2021). Crossing Beijing’s “Red line”? China’s response to Lithuania’s values-based foreign policy. Lithuanian Foreign Policy Review, 40, 17–21.
Disclaimer: While Euro Prospects encourages open and free discourse, the opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or views of Euro Prospects or its editorial board.
Write and publish your own article on Euro Prospects
Subscribe to our newsletter – stay informed when we publish articles on pressing European affairs.
