Welcome to the 24th issue of the #CEEasia Briefing.
In this issue we dissect the following topics:
- Slovak delegation visits Taiwan
- Sino-Lithuanian dispute escalates
- South Korea’s another plant in Hungary
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1. Slovak delegation visits Taiwan
What’s going on? Slovakia’s Deputy Minister of Economy Karol Galek led a 43-member delegation to Taiwan, marking the country’s highest-level delegation since the 2003 opening of the Slovak Economic and Cultural Office in Taipei. The purpose was to attend the first session of the Taiwanese-Slovak Commission on Economic Cooperation. The visit concluded with nine MoUs, including one between the Hsinchu Science Park and the Technical University of Košice. In addition to this, the delegation visited the Taiwan Semiconductor Research Institute, which is noteworthy considering potential semiconductor cooperation between Taiwan and three CEE countries visited by the Taiwanese business delegation earlier in October, Slovakia being one of them.
Going deeper… The nine MoUs, which cover cooperation in space, smart cities, electric vehicles, semiconductors, and science parks, were linked to the seven MoUs that were previously signed during the October visit led by Taiwan’s Minister of National Development Council Kung Ming-hsin. Slovak delegation was welcomed by the Minister of Foreign Affairs Joseph Wu, who also visited Slovakia back in October. This came amidst Slovakia’s increasingly friendly gestures towards Taiwan that date back to the 2020 parliamentary elections when a coalition more critical of the country’s engagement with China has formed the government. Slovak-Taiwanese relations picked up speed following Slovakia’s donation of vaccines to Taiwan, which was presented as a reciprocal action for Taiwan’s earlier mask donation to Slovakia.
This means… Similar to Czechia and Lithuania, Slovakia is another CEE country that is becoming increasingly critical of China and supportive of Taiwan. However, the country is unlikely to follow Lithuania in leaving the China-CEE cooperation mechanism known as 16+1 in the short term, unless a 27+1 alternative becomes a reality at an EU level. Still, Slovakia is indeed following the Lithuanian example as far as increasing support for Taiwan and its international space is concerned. The latter is a development visible within the EU as a whole, with countries less inclined to engage in critical policies, such as Germany, now rethinking their China policy.
Further reading:
TaiwanPlus: Taiwan-Slovakia Strengthen Relations (interview with CEIAS Executive Director Matej Šimalčík)
SCMP: Taiwan and Slovakia hold talks as island strengthens ties with Europe
The Diplomat: Slovakia’s Growing Ties With Taiwan Signal Discontent with China and Central and Eastern Europe
Focus Taiwan: Taiwan, Slovakia sign agreement, 9 MoUs to deepen cooperation
2. Sino-Lithuanian dispute escalates
What’s going on? A few days after the opening of the Taiwanese Representative Office in Vilnius, China decided to downgrade its diplomatic relations with Lithuania from the level of ambassador to chargé d’affaires. Such a move has not been seen at an EU level since the Dutch-Chinese dispute in 1981 when China downgraded its diplomatic ties with the Netherlands for three years following the Dutch decision to sell submarines to Taiwan. However, what made the current move more pronounced was the rapid evacuation of staff from the Lithuanian embassy in Beijing due to concerns about the potential loss of the staff’s diplomatic immunity. Even more striking are the emerging reports of Chinese economic sanctions against Lithuanian companies as well as multinational companies active in Lithuania or doing business with Lithuanian suppliers.
Going deeper… Beijing has long warned Lithuania that its decision to allow Taipei to open a de facto embassy under the demonym “Taiwanese” in Vilnius would be met with fierce retaliation from Beijing. Nevertheless, only a few would have predicted the former’s decision to target Lithuanian exporters through global supply chains. As Lithuania’s direct exports to China accounted for less than 1% of its total exports in 2020, many analysts downplayed the significance of possible economic repercussions. Yet, in addition to the direct sanctions, China is trying to punish Lithuania through German, French, and other EU companies that have Lithuanian suppliers. Indeed, the European Commissioner for Trade Valdis Dombrovskis is now looking into the Lithuanian complaints about their companies’ ongoing struggles in accessing the Chinese market, which started when Lithuania had seemingly been removed as a country of origin from China’s customs registry.
This means… The EU may be forced to upgrade its support for Lithuania from a purely rhetorical to a more substantive level. Indeed the Lithuanian Minister of Foreign Affairs Gabrielius Landsbergis has long argued for such a move and his demands have only intensified in recent weeks, particularly amidst the expected financial support from the US in the form of a credit loan of USD 600 million. In light of this, Dombrovskis mentioned the potential use of the EU’s anti-coercion instrument, although this is only in a proposal stage and, similarly to any potential action taken by the WTO, would take a long time to implement. This highlights the need for the EU to hasten the process of upgrading its regulatory framework to improve its own resilience in light of China’s increasing attempts to weaponize trade and investment relations. In the meantime, Lithuanian-Chinese relations will continue on their downward path, with China potentially implementing further sanctions against Lithuanian and other EU companies in an effort to dissuade other member states from following the Lithuanian example.
Further reading:
POLITICO: China’s trade attack on Lithuania exposes EU’s powerlessness
CHOICE: China Pulls the Economic Coercion Card Against Lithuania
The Economist: Lithuania evacuates its embassy in China
3. South Korea’s another plant in Hungary
What’s going on? A month after the second summit of the V4 countries and the Republic of Korea took place in Hungary, South Korea’s top cathode materials producer EcoPro BM has unveiled its plans to ramp up its production with investments abroad. The company is preparing to set up its first overseas factory in Hungary in the town of Debrecen. The first phase of the plant’s construction is intended to be finished by the end of 2024 and the factory should eventually reach an annual capacity of cathodes producing about 1.35 million electric vehicles.
Going deeper… This investment of more than USD 800 million was announced by Hungary’s Foreign Minister Péter Szijjártó and is predicted to create up to 630 jobs. The project is also going to be supported by a Hungarian state aid, the amount of which is to be revealed after the EU Commission examines and approves it, a factor that among other things played a role in the company’s decision to expand to Hungary.
This means… South Korean companies have maintained a number of projects and investments in the V4 countries and they tend to be closely interrelated. The impulse to develop cooperation in the battery industry can be linked, for example, with the Korean car companies settled in the Czech Republic and Slovakia or the Samsung battery plant in Hungary, which in fact is said to become the largest purchaser of the cathodes produced in Debrecen. EcoPro BM’s case thus illustrates the spill-over effect of other companies’ investments in the region and their long-term benefits.
Further reading:
CEIAS: CEIAS Considers: What’s the future of V4 relations with South Korea?
Reuters: South Korea’s EcoPro BM to invest in $810 mln cathode plant in Hungary
Yonhap: EcoPro BM to build 1st overseas cathode plant in Hungary
