2021.09.28 08:00

‘No substitute for China’. Lithuanian firms losing business amid row with Beijing

Irma Janauskaitė, LRT TV, LRT.lt2021.09.28 08:00

Amid diplomatic tensions between Vilnius and Beijing, Chinese companies are cancelling contracts with Lithuanian businesses. Export advisers suggest expanding trade with Taiwan, but companies fear it would not be an adequate substitute for Chinese markets.

Despite the pandemic, the dairy processor Vilkyškių Pieninė has seen its exports and annual turnover increase.

“People can be without shoes, without jackets, but they must eat,” says Gintaras Bertašius, chief executive officer of Vilvi Group, the owner of Vilkyškių Pieninė.

However, the company can no longer export its products to China, with Chinese partners refusing to renew or conclude new contracts.

“China may not be able ban our production officially. They do this in a roundabout way, by conducting checks, and our buyers do not want to have problems with imports,” says Bertašius.

Read more: Lithuanian businesses report supply disruptions amid Vilnius-Beijing tensions

Although Vilkyškių Pieninė has been exporting relatively little of its produce to China, the market has been highly profitable – and a lot of work was invested into getting a foothold there, according to Bertašius.

This came following the attempts of previous Lithuanian governments to encourage exporters to expand into China.

“One government tells you to go for a market, China, then the other one says ‘stop’. It is a big problem that we, as a state, are so inconsistent.”

Compared to 2019 and 2020, Lithuanian sales in China have decreased this year.

Meanwhile, Lithuania has been strengthening ties with Taiwan. According to data from Taiwan’s institutions, people in the island’s seven large cities purchased 76-million-euro-worth of goods from Lithuanian online shops between February and late June.

Read more: People in Taiwan up spending Lithuania’s online stores as ties grow stronger

Amid tensions with Beijing, the Taiwanese market could make a good alternative, says Rasa Uždavinytė, head of export department at Enterprise Lithuania.

“Taiwan imports a lot [and] it’s a very receptive country in terms of import. Only a third of the island is populated, so they are very productive and effective for their size,” she says. “It’s also the 31st richest country in the world, compared to China which is 61st.”

However, Taiwan cannot compare to China in market size, Bertašius argues.

“In China, there are around 1.5 billion people, while Taiwan's population is 23 million. So, neither Taiwan nor any other small market can ever replace China.”

Lithuania’s exports have been growing this year and surpassed the pre-pandemic level. Foreign trade is led by the engineering industry, chemical industry, furniture manufacturers and food processors, according to data from Enterprise Lithuania.

“Setting aside the dip of 2020, exports as a whole have increased by some 10 percent. There's a difference between goods and services, naturally, services were more affected by the pandemic and cannot recover as fast, such as tourism,” says Jonė Kalendienė, head of research and analysis at Enterprise Lithuania.

“All over the world, there’s money being poured into markets because of the pandemic [...]. On the one hand, there are slightly fewer services, people can travel less, perhaps go to restaurants less, [...] so they buy goods. On the other hand, we see the risk of inflation. People try to get rid of money,” according to Sigitas Besagirskas, president of Vilnius Industry and Business Association.

Lithuania will see positive export growth, but it may be short-lived, Besagirskas says.

“Things will be sad afterwards, because some companies are expanding only thanks to easy money. People will have an overabundance of things, especially real estate and so on, and there can be a pretty sharp dip in a few years. But it won’t come too soon,” he says.

The coronavirus pandemic, as well as Lithuania’s row with Belarus and China may hinder export growth, according to Enterprise Lithuania.

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