“Absolutely all countries have clearly said that they will not be active in defending Lithuania when it comes to China”
According to her, both Lithuania’s allies and the EU are trying not to clash with the world’s second largest economy. The representative of the Presidency noted that although China’s economic pressure has not disappeared, it is good for Lithuanian business to reorient itself. Really? What are the losses? Is it worth talking about the normalization of relations between Lithuania and China?
On this topic, he spoke with Arūnas Laurinaičius, vice president of the Confederation of Lithuanian Industry (LPK), in the program “Dienos kistas” of “Žinių radio”.
According to him, the situation is ambiguous – the policy pursued by China helped Lithuania’s business to reorient itself. This pushed Lithuanian businesses to look for ways to end tourism contracts and extend new ones.
“Business is wise – various schemes have appeared. Some companies have switched to using the services of intermediaries. Lithuanians imported goods through those companies that were connected in Poland or Latvia – countries that cannot have political problems with China. Some companies, having calculated what is better for them, went on to establish companies in the mentioned countries.
However, Lithuanian business, starting to work through intermediate countries, will be full of costs and difficulties. Firstly, the delivery time was longer – companies were looking for additional turnover: more money was needed until the goods reached Lithuania through an intermediate country. Naturally, the intermediary also earns extra. There were also additional costs when transshipping the production from some country and transporting it to Lithuania”, said A. Laurinaitis.
He reminded that when the conflict with China arose, there were moments when Lithuania really disappeared from the customs system, and there was an indirect instruction for Chinese businesses not to do business with Lithuanians. This naturally forced Lithuanian business to withdraw from China.
The vice president of LPK calculates that, comparing 2021 with 2022, exports to China have decreased more than 10 times. At the moment, it remains only as useful to China: it continues to import from Lithuania the corresponding products, semi-finished products, which it does not produce itself. These are special electronics, very accurate measuring devices, such as lasers, metal alloys. And all other goods that were imported from Lithuania and could be replaced very quickly, completely disappeared from the Chinese market.
“The majority of Lithuanian companies trusted the Lithuanian policy that China is a priority market for Lithuania. The state spent money for organizing visits and exhibitions. Lithuanian business, following politicians, had invested quite a lot in finding partners and entering into contracts. As the Chinese market closed all the main export directions, the companies that were working had to leave China.
We preliminarily estimate that about 80 percent have left. companies that have worked with China. However, as I mentioned, some companies operate through intermediary companies or countries. If we exclude them as well, up to 50 percent. the companies that worked with China, due to the cooling of relations between Lithuania and China, were forced to stop their work and leave China”, commented the show’s marketer.
According to him, although at that time Lithuanian businesses expected a lot from the Taiwanese market, the expectations did not come true. “Today, politicians want to celebrate that they have found a counterbalance to China, but this is not true,” said A. Laurinaitis.
He evaluates figures showing import and export volumes from and to China.
The LPK vice-chairman pointed out that it took 5-6, and sometimes 8 years to enter the Chinese market. As for building relations with the Taiwanese market, now, according to A.Laurinaitis, they are only at the initial stage, when there are a lot of delegations both to one side and to the other side, and Lithuanian business is trying to understand Taiwanese culture.
“Everything takes time, but the closure of China and the opening of Taiwan today do not offset the business outlook that was envisioned in China and is emerging in Taiwan,” I assessed.
He recalled the recent meeting between the German Chancellor and the Chinese President, where cooperation was discussed. Germany has invested the most from EU countries in China.
“There is a lot to communicate in the European business confederation BusinessEurope, which connects 40 business structures from 34 countries. Absolutely all countries, when we talk about the case of China, have clearly said that they will not be active in defending Lithuania, so as not to harm the members of their countries. They are well aware that China is the second largest economy in the world.
China has some components that are very much needed for renewable energy. Let’s say silicon, the main raw material in the production of chips, semiconductors – everything is concentrated in China. Therefore, having no relations with China would push Lithuania into the industries, so that Lithuania would have to reconsider what kind of business branches could remain competitive if the situation with China did not improve”, said the LPK representative.
And whether it will improve, no one knows for sure – there are both optimists and pessimists. in the first month, BusinessEurope organized a meeting of business and ex-member country leaders with the Chinese ambassador to the EU and other Chinese business representatives. According to A. Laurinaitis, the ambassador, without mincing words, clearly said that if Lithuania wants to have normal relations, the political one must find an agreement and start talking.
“When politics changes, everyone thinks that the previous government is evil, so something needs to be changed. Although I have not seen a single country making money from politics. When a politician underestimates business and says that they are better than what to do, it becomes so strange”, “Zinių radio” thought and knew.
The extent to which business would return to China depends on the relationship of trust between politicians and business recovery, and whether a formula can be found to develop consistent business. “Business does not want to do politics, it does not want to engage in diplomacy, but it wants to be between politics and business in those countries where business sees a perspective,” said A. Laurinaitis.
He talked about the fact that when he went to China, business invested money, people, some companies even changed technological lines, some borrowed money and gave corresponding commitments to the bank, planned development – that is, they accepted people, made a commitment to their family that the employees would get salaries, I can take home loans. Therefore, the quick one-day decision to close the market was extremely unexpected.
“In my understanding, it would probably be possible to do this if the politicians said that there would be certain decisions in a year or two. This would have been enough for the business to allow them to exit the Chinese market as much as they thought was safe, risk-free.
“Politicians should make decisions for business, because business bears all the losses, and politicians bear political dividends,” said the LPK vice-president.
In response to a possible military conflict between China and Taiwan, he said: “None of us know what will happen with China and Taiwan, but we should listen more to the attitude of the big countries – the US, Germany – towards China and Taiwan, and maybe learn a little diplomacy before the whole world positive relations with China and benefits from it.
This is necessary so that Lithuanian business is not pushed to the economic margins and unfair competitive conditions are not created for it, because most of the production goes to EU member countries, and they have the opportunity to receive materials and semi-finished products from China”.