Taiwan pledges $270m fund to counter Chinese pressure on Lithuania

TAIPEI (BLOOMBERG) - Taiwan pledged to establish a US$200 million (S$270 million) fund to invest in Lithuania and open up its markets to the Baltic nation in reaction to economic pressure from China.

The offer comes as Lithuania faces unofficial trade hurdles and a downgrade of diplomatic ties with China after it allowed a representative office to open in its capital under the name of Taiwan, a move Beijing deems a violation of its one-China principle.

Taiwan will use the fund to invest in the areas of semiconductors, lasers, biotechnologies and research in Lithuania, Mr Eric Huang, the head of the Taiwanese Representative Office in the capital Vilnius, said in a press conference on Wednesday (Jan 5). It will also send a team to assess Lithuania's aspirations to develop a semiconductor industry, he said.

"It's time for us to help with your difficulties," said Taiwanese Deputy Foreign Minister Harry Tseng Ho-jen at the same press conference.

Lithuania has sought to build closer economic ties with Taiwan and is expecting to gain a foothold in Taiwan's semiconductor sector since last year, when it left the Chinese-led 17+1 format, a group of EU states that China uses to engage and influence the bloc.

Taiwan's National Development Council and Lithuania's Economy Ministry have yet to discuss the details of the investment fund, which will be financed by Taiwan's National Development Fund.

An even larger fund for investments backed by Taiwan's central bank is in the works, Mr Huang said.

On the trade front, Taiwan is also working to redirect about 120 containers of Lithuanian products that have been halted at Chinese ports and to open up the island's market for the Lithuanian dairy and grain, Mr Huang said.

A Taiwanese company also purchased 20,400 bottles of Lithuanian rum that China refused to let into the country, according to the South China Morning Post.

"Taiwan is committed to accelerate the process for Lithuania as Lithuania faces such unprecedented economic coercion in international trade history," said Mr Huang.

The dispute has triggered political tensions at home in Lithuania, where President Gitanas Nauseda criticised the government on Tuesday for opening the office with Taiwan by saying using the name of the island democracy in the label was a mistake.

Mr Tseng defended the decision: "Yes, there's a significance in the name," he said. "Taipei is only representing a city or a capital. By using Taiwanese, it's more clear in its identity."