Conflict with China is cornering Lithuanian companies: authorities ask for loan guarantees

Lack of working capital

Rimas Varkulevičius, president of the Lithuanian Chamber of Commerce, Industry and Crafts, said that the situation of relations of some Lithuanian companies with China is well known and that the consequences of the diplomatic conflict mainly affect medium-sized companies.

“We see that not only the supply and import of goods has been stopped, but we also see that there are cases where China is blocking the issuance of letters of credit. Then the company, through its subsidiary in another country, tries carry out the operation, and China provides recommendations to local authorities not to serve companies with Lithuanian capital in commercial operations with China, “he said.

In general, as he explained, there are really tough challenges right now, as some companies source most of their production from China, and today they are trying to find alternatives in cooperation with other Asian countries.

Vidmantas Janulevičius, president of the Lithuanian Confederation of Industrialists, said that it is difficult to say exactly how much companies are suffering today due to the complicated relations with China, but explained that around 20 companies in our country are facing problems.

“The losses are caused by the lengthening of supply chains, which extends further for Lithuania, and there are also losses, because companies have to invest their capital when ordering goods. Previously, ordering required 15 percent. advance and the remaining amount was paid upon receipt of the goods.

Now 100 percent. we pay forward. Another problem is that the container sailed for 35 days, now between 70 and 90 days. Supply chains are getting longer, so working capital is needed for these materials to arrive, ”he said.

Rescue of state guarantees for loans

According to V. Janulevičius, the government could help the company that is currently facing problems.

“No subsidies are needed, there is a simple lack of working capital for medium and large companies.

We see that it would be good to have state guarantees or to lend money to companies that lack working capital in this context with China. We could have a loan guarantee package that could amount to between $ 200 million and $ 300 million. EUR.

However, loans should not be made at prices that are often offered, expensive. It might be higher for the state to make money from it, but the interest rate would be 2 to 3 percent, not 7 to 8 percent, “said V. Janulevičius.

A representative of the industrialists highlighted that last year was a record year in terms of exports of goods, which also generated more taxes collected for the state.

“And in this case, the state should help companies when such problems arise,” he said, adding that help should be provided quickly so as not to disrupt the supply chain.

“You have to place an order now and the products will arrive here in 70-90 days. Therefore, it may be too late, we will stop,” he explained.

Ministry: we will solve the problem

The Ministry asked the Ministry of Economy and Innovation about the help the company can receive from the government if a company faces difficulties in a diplomatic dispute with China.

According to its representatives, the ministry is in contact with companies that are experiencing difficulties in relations with China.

“A survey of these companies is being carried out and the situation is constantly monitored.

On the basis of the information gathered, the question of the provision of support measures or other aid will be decided – adaptation of existing ones or development of new ones.

The ministry, together with its subordinate institutions, is also analyzing the possible impact on the country’s exports and imports, “the responses read.

Prime Minister Ingrida Šimonytė also spoke earlier about helping these companies. He said the government was looking for ways to help companies affected by Lithuania’s diplomatic dispute with China.

“The State should and will certainly help, we are looking for those tools (…) both in the search for other markets and in the financial instruments that some companies may need, for example, for certain payment schemes that have been established,”, Said BNS earlier Šimonytė.

“We really do that, we just have to be very clear about what those weak points are and for whom that tool is best suited, but yes, we are working in that direction,” he said.