China has told multinationals to sever ties with Lithuania or face being shut out of the Chinese market, a senior government official and an industry body said, dragging companies into a dispute between the Baltic state and Beijing.

China downgraded its diplomatic ties with Lithuania last month after Taiwan opened a representative office in Vilnius. Lithuania¡¯s ruling coalition had agreed in November last year to support what it described as ¡°those fighting for freedom¡± in Taiwan, putting its relations with China at risk.

China views self-ruled and democratically governed Taiwan as its territory and has stepped up pressure on countries to downgrade or sever their relations with the island.