It is no surprise that we’re seeing China Manufacturing Moving to Mexico. Political rhetoric in the US lately is down on international trade and down on trade partners, China and Mexico. It comes as no surprise that these two manufacturing countries have been strengthening ties in recent months and even years. The two countries have much in common and stand to benefit greatly from one another.
A Burgeoning China-Mexico Partnership
China and Mexico seem to be proactively increasing economic and diplomatic ties lately, but the two countries are no strangers to one another. China is already Mexico’s second largest trading partner. China-Mexico relations have been cordial for many years, but there is a growing sense that the two countries have much in common. For example, Mexico needs infrastructure for their newly opened energy sector, while China needs to source cheap energy soon. Talks between the two have increased in recent months. Additionally, Chinese firms are eager for opportunities to gain closer proximity to the US consumer market, and Mexico – already thoroughly integrated with the US economy – needs more capital and inputs.
Chinese companies like Hisense Co. are expanding their Mexican holdings or opening new facilities in the Latin American manufacturing country. The situation is ripe for a harmonious partnership, as Mexico expands its international relations and China positions itself closer to the US.
China Manufacturing Moving to Mexico
China-Mexico relations make sense for many reasons. Timing is one of those reasons. China’s manufacturing boom is currently slowing down, yet Mexico’s is only beginning. Other incentives for Chinese business include:
- Mexico has made great strides in recent years, reforming transportation, energy, commercial and labor laws, as well as safety.
- Mexico provides China access to countries around the world with over 40 trade deals in place – most notably with the US.
- China stands to benefit from Mexico’s uniquely integrated partnership with US producers. Mexico’s business ties to the US become China’s as more Chinese companies develop ties with Mexican manufacturing.
- Productivity is rising in Mexico, while wages remain stationary. This provides immense benefit to companies from China where wages continue to rise against productivity.
The strengthening of China-Mexico relations makes sense for both countries at this time on the world front. If the US minimizes trade with trade partners like Mexico and China, a stronger China-Mexico partnership will help both countries through the downturn. If US trade policy remains on its current course, Mexico will become even more productive with Chinese investment, and China will become more profitable with lower labor costs and better access to US markets.
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