[ad_1]
The same trend has been seen in China’s battery exports to Mexico, particularly lithium batteries used in electric vehicles.
China’s battery exports to Mexico grew 35 percent year-on-year in 2018, followed by 32 percent in 2021 and 11 percent in 2022. According to GAC, last year this figure saw a decline of 6 percent.
China cuts duties on 143 Argentinian products amid tense bilateral relations
Overall inflows into Mexico, a leader in the global automotive industry and a country with a huge, young and relatively cheap labor force, are following a similar trajectory.
Direct investment into Mexico from China, which reached a one-year high of $587.2 million in 2022, declined by $21 million in the first three quarters of 2023, according to Mexican government data.
But Chinese direct investment in Mexico doubled in 2018 from 2017 figures.
The investment landscape in Mexico is also undergoing change. More Chinese companies are investing in the U.S. border state of Nuevo Leon, relocating away from the capital Mexico City.
In 2018, Chinese investment in Nuevo León rose to 3.4 percent of total investment in Mexico, up from 0.16 percent in 2017. Last year, Chinese direct investment flows into Nuevo Leon reached 48.3 percent of net inflows into Mexico.
“One would think that a large part of that orientation would be to help those companies maintain access to the U.S. market and to pursue key suppliers in that U.S. supply chain,” said Evan Ellis, research professor of Latin American studies at the U.S. Army War College at Strategic. To be brought into position.” Study Institute. “Certainly also recognizing that the Mexican market remains important.”
China ‘more investable than ever’ for Middle East, Latin America, but West cautious
Monterrey, the capital of Nuevo Leon, was one of the first cities in Mexico to develop an automotive industry and hosts factories for several multinationals, including Elon Musk’s Tesla Inc.
In October, construction equipment maker Lingong Heavy Machinery Co. of the eastern province of Shandong said it planned to open a 10 square km (3.86 sq mi) industrial estate near Monterey. The park will include manufacturing sites, warehouse space and logistics services, the company said in a statement.
That site, about 220 kilometers from the U.S. border, “serves as an extraordinary gateway to the North American and Latin American markets,” Lingong said.
The biggest obstacle to setting up shop in Mexico is that companies will lose most of the money in the beginning.
Liu Jing, Cheung Kang Graduate School of Business Chinese telecom giant Huawei Technologies, home appliance maker Hisense and battery company Contemporary Amperex Technology have already established themselves in Mexico. All are under the microscope of the US government; Huawei has been sanctioned, and the other two are currently under investigation.
There may be more checkpoints along the way. In November, the Investment Research Center of Beijing’s Cheung Kang Graduate School of Business led a 40-person team of executives in manufacturing and logistics on a business trip to Mexico.
Liu Jing, the center’s director, said after a survey of aspiring entrepreneurs that Mexico still faced “law-related issues” and that investors could find a young but “untrained” labor force.
02:51
An underground world: discover Mexico’s largest Chinatown a century ago
An underground world: discover Mexico’s largest Chinatown a century ago
“The biggest hurdle to setting up shop in Mexico is that companies will lose most of the money in the beginning, as costs in Mexico are estimated to be 30-40 percent higher than in China,” he said. “many [have] indicated desire to set up shop [there]But not on a large scale.”
In addition to those expensive start-up costs, Chinese manufacturers will also have to contend with Mexican labor gangs and possibly crime, said Ilaria Mazzocco, trustee chair in sugar trade and economics at the Center for Strategic and International Studies, a Washington-based think tank.
“Companies will need to be flexible and adapt quickly to adjust to the Mexican environment, but there are clearly important draws for them as they plan to enter the U.S. market,” Mazzocco said.
Latin America expert takes over as head of China Friendship Association
Factory operators based in China have diversified into other countries so they can access the U.S. market without paying tariffs on a cumulative US$550 billion of goods affected by the trade dispute.
China’s total outbound direct investment is expected to rise 11.4 percent to US$130.1 billion in 2023, Beijing’s commerce ministry said on Thursday.
Latin America is a major destination for those outflows – particularly countries like Argentina, Brazil and Honduras, which have strengthened ties with China following government changes.
The population is large and it has a young demographic, both of which indicate huge market potential
Yun Sun, Stimson Center
Mexico, meanwhile, has urbanization close to the level of developed countries, with a rate of 81 percent – 15 percentage points higher than China. This means Chinese companies can sell to a population of 129 million with per capita income that has grown steadily since 1990.
Access to the US remains the main motivator for most Chinese investors, but the Mexican market also offers an “insurance policy” because of its growing middle class, said Jayant Menon, senior fellow at the ISEAS-Yosof Ishak Institute in Singapore.
According to research by José Ignacio Martínez Cortés, coordinator of a trade laboratory at the Center for International Relations under the National Autonomous University of Mexico, Chinese cars represented 19.5 percent of the Mexican domestic market at the beginning of last year — up 5.8 percent from 2018. Growth.
“Cheap Chinese products will be competitive there,” said Yun Sun, director of the China program at the Stimson Center think tank in Washington. “The population is large and it has a young demographic, both of which indicate huge market potential.”
Chinese automotive giant BYD announced last month that it has already deployed 20 electric buses in Mexico City, a dense metropolis with high levels of pollution. This represents the largest fleet of such vehicles sent to the city in a single delivery.
Chinese carmakers are also looking to take advantage of Mexico’s preferential tariff status in the North American market.
The Mexican government will be particularly sensitive to pressure from Washington because of its close ties with the United States
Ilaria Mazzocco, Center for Strategic and International Studies
The United States–Mexico–Canada Agreement (USMCA) trade deal, ratified in 2018 and entered into force in 2020, mandates for automotive companies to qualify for total tariff exemptions that 75 percent of their components be produced in Mexico, the United States or Be made in Canada.
Over the past 10 years, Chinese companies have been encouraged to locate sites in Mexico as well as Latin America, said Enrique Dussel Peters, an economics professor at Mexico’s National Autonomous University.
“This has been one of the most outstanding and dynamic impacts of Latin America-China relations in the last decade,” he said.
02:45
Inflow of Chinese migrants on dangerous Central American route to reach America
Inflow of Chinese migrants on dangerous Central American route to reach America
However, tensions between the US and China could eventually spill over to Mexico, a longtime US ally.
“The Mexican government will be particularly sensitive to pressure from Washington because of its close ties with the United States,” Mazzocco said.
The US and Mexico signed a letter of intent in December, promising to maintain an “open investment environment” but also to cover “certain technologies, critical infrastructure and sensitive data”. The need to examine the conduct of the country was also stressed. The US Treasury Department said in a statement.
China sees great potential and room for development in relations with Mexico: Wang Yi
“I don’t think there will be a blanket ban or ban on Chinese investment,” Sun said.
Rules under the USMCA encourage North American sourcing, so if Chinese investment prioritizes Mexican sourcing over home, “it can avoid potential risks,” said Hal Utar, associate professor of international economics at Grinnell College in the US. he said.
China’s commerce ministry said at a press conference in December that its cooperation with Mexico on new energy vehicles is “normal commercial activity between two sovereign countries”, and the US has no right to interfere.
Chong Jae Ian, an assistant professor of political science at the National University of Singapore, said officials in Beijing would support offshoring to Mexico as long as it brings revenue at home.
“Many Chinese companies will be more eager to invest in overseas markets as domestic demand is slowing,” Chong said. “China will not see it as [loss of] “The pace of development, because location is not as important as ownership.”
Source: www.scmp.com
[ad_2]
