By Adina Moloman
Chinese and other Asian countries are joining in the growing trend to invest in manufacturing in Mexico. New investments or expansions are announced regularly for companies in Europe, South America, and around the world – and now Asian countries like China are seeing manufacturers make the switch. Why are they moving to Mexico?
Reasons Chinese Manufacturing is Moving to Mexico
The manufacturing boom in China has slowed down dramatically, and Chinese companies are seeking for alternative methods of increasing efficiency and productivity to impact the bottom line. Like companies from around the globe, Chinese companies are achieving just this simply by moving to Mexico. The top reasons driving this move include:
- Free Trade Agreements: Mexico is uniquely positioned as an export base due to their 40+ free-trade agreements (FTAs) in place with countries around the world. Mexico is also a signatory to the NAFTA and TPP.
- Reforms: Mexico has made great progress in recent years in overhauling its transportation and energy infrastructure, commercial-law regime, energy sector, and labor laws.
- Labor Advantage: While China’s labor costs are rising, Mexican productivity is rising steadily. Wages have remained stationary during this recent period and are now lower than those in China.
- Proximity: Mexico shares a border with the largest consumer market in the world. Furthermore, Mexico is highly integrated with the US economy, providing unique positioning for partnership with US industry for those companies in China moving to Mexico.
A Mexico-China Partnership
China is only the latest in a wave of foreign countries with manufacturing companies moving to Mexico, but the country is pushing to make it count. Frequent news are routinely announced of yet another Asian company choosing to produce in Mexico. China’s Hisense Co. announced they were doubling their Mexican investment earlier this year, for example, and several other electronics brands are following.
Due to the benefits of moving to Mexico previously listed, China has recognized its mutual goals and complementing assets with Mexico, and is pushing for a partnership. Mexico is has been very friendly to their efforts. In fact, just two years ago, Mexican President Enrique Peña Nieto made a highly visible trip to China to meet with the Chinese president and discuss ways Mexico could help their “strategic partner.” The two manufacturing countries have much in common. For example, while China imports most of their energy, Mexico is a net exporter of petroleum. Due to this budding partnership, we are likely to see continued movement into the Latin American country from China and her Asian neighbors.