New Report | Resilience and Resolve: Lessons from Lithuania’s Experience with Chinese Economic Coercion
NEW YORK; April 17, 2024 — A new report from the Asia Society Policy Institute examines China’s ongoing economic coercion against Lithuania in response to Vilnius seeking closer ties to Taiwan. The case study reveals China’s evolving coercion tactics and provides lessons for countries that may be targeted by Beijing in the future.
“Economic coercion is a growing threat to the international trading system that cannot be ignored,” said Asia Society Policy Institute Vice President Wendy Cutler, one of the co-authors of the report. “The example of Lithuania shows how countries can deal with coercion by remaining alert to this threat and pursuing creative ways to mitigate its negative impacts.”
In 2021, Lithuania announced its intention to allow Taiwan to open a representative office in Vilnius as part of a broader effort to pursue greater cooperation with Taiwan. In response, China launched a series of retaliatory measures including a de facto trade embargo, making Lithuania the target of some of the most sweeping sanctions from Beijing in recent times.
The report charts the early strains in the relationship, and the events following Lithuania’s 2020 elections and the incoming government’s China policy. Following the initiation of China’s punitive economic measures, the report details how a number of economies, including the European Union and the United States, offered Vilnius support. Washington provided diplomatic backing and practical economic assistance. “Countering economic coercion was elevated as a key [U.S.] priority after U.S. officials felt they could have done more to support Australia and South Korea in the wake of similar incidents,” the report states.
Many aspects of Beijing’s economic coercion campaign against Lithuania are similar to earlier episodes of Chinese coercion, the report notes, citing the following factors:
• The economic measures are informal and lack transparency
• They are often paired with diplomatic pressure.
• The pressure is often escalated over time.
At the same time, the report indicates that China’s lack of economic leverage over Lithuania due to minimal trade ties may have led Beijing to pursue novel tactics, such as secondary sanctions against foreign firms that used components made in Lithuania.
Because “no country is immune from the possibility of Chinese economic coercion,” the report synthesizes lessons from the Lithuania case and offers suggestions that other governments can adopt. It also identifies precautionary steps countries concerned about economic coercion can take to become more resilient. These include:
• Assess vulnerabilities and identify pressure points that could be targeted.
• Reduce China’s leverage by building resilient supply chains and diversifying exports.
• Adopt mitigation tools such as assistance programs that kick in if coercion occurs.
• Screen investments that could leave them exposed to coercion.
• Establish a government-wide group to prepare for coercion.
The report was co-authored by Cutler and Shay Wester, Director of Asian Economic Affairs at the Asia Society Policy Institute. Read the full report here. Members of the media interested in connecting with the report authors should email [email protected].