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The EU on Tuesday approved state aid to Lithuanian companies affected by China's "discriminatory" trade barriers in a row over Taiwan.
Lithuania has attracted bitter retaliation from China after Taiwan was allowed to open a de-facto embassy in Vilnius. Beijing staunchly rejects any international support for the island's sovereignty.
The European Commission said it approved 130 million euros ($138 million) in financial support for "the exceptional circumstances resulting from China's discriminatory trade restrictions on Lithuania", a statement said.
The EU alleges that Lithuania is a victim of trade coercion from Beijing and has taken the case to the World trade Organization.
Lithuania's fight with China began when a newly opened mission from Taiwan in Vilnius explicitly referred to the self-ruled democratic island instead of just Taipei, its capital city, as is common practice to placate Beijing.
In retaliation, Beijing downgraded diplomatic ties and Lithuanian exports have been stopped at China's border, with widespread reports that European exporters have been cautioned by Beijing clients to cut all ties with the country.
Beijing claims Taiwan as its territory and has vowed to one day seize it. But the majority of Taiwanese do not want Chinese rule.
Relations between Brussels and Beijing are at a low point after a failure to ratify a long negotiated investment deal was followed by a round of tit-for-tat sanctions that was sparked by European concern for the plight of the Uighur minority in China.
The EU is also perturbed by China's ambiguous stance on Russia over the invasion of Ukraine and has urged Beijing to more clearly oppose President Vladimir Putin's war.
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