Chinese food manufacturers are not giving up on the American market, they are just adapting to the conditions. They take their production lines and move them to Mexico, and then they can write Made in Mexico on the products. In this way, the costs of transporting the finished product can be saved (this is a significant item for larger products, such as furniture), and all customs duties and sanctions imposed on Chinese goods can be avoided.
Industrial parks, explosive exports
The BBC mentions a specific Chinese company that mainly produces beds and sofas. It arrived in the Mexican city of Monterrey in 2022 and currently employs 450 people, but plans to increase this to 1,200. They are satisfied with the Mexican workforce, productivity is high. The company is just one of many that chose Mexico, and the impact is already being felt by the Mexican economy: the country’s exports increased by 5.8 percent to 53 billion dollars in one year.
Mexico created industrial parks in order to receive the many investments, and in the existing industrial parks all areas that can be built on have already been reserved, the investments will be completed by 2027. Not only the Chinese companies themselves are coming, but also American companies that bring production from Asia, primarily from China. Among them is Tesla, although the 10 billion dollar investment has not yet started.
An advantage for the United States as well
The question arises as to whether the US government will be bothered by Chinese manufacturers finding a workaround, but presumably they want to quarrel with Mexico much less than with China itself. Moreover, the primary interest of the USA is for Mexico to catch up thanks to the large number of investments, because then the immigration pressure from Mexico will decrease. If Mexico has many, relatively well-paying jobs, it can absorb Spanish-speaking immigrants from poor Central American countries and integrate them easily.
Catching up
The Mexican economy is growing rapidly as a result of the positive effect: currently the GDP per capita is roughly 15,000 dollars, while China’s is 13,000. However, 3 years ago, Mexico was still behind China. At the same time, the figure for the USA is around 80-85 thousand dollars, so there is plenty of room for catching up, and at the same time, even if the wage level in Mexico rises quickly, it will not be so high for a long time that it is not worth the production for Chinese companies.
Over time, it is possible that the process will also start in other Latin American countries and a kind of continental catch-up process, similar to what is happening in Europe, even if not at such a high level as in the case of Mexico. The economic recovery would be good for all of Latin America, and the USA would get rid of the current immigration pressure on its southern borders, so the process is favorable for everyone.
Effects in China
Undoubtedly, part of the production will leave China, but in return, many Chinese companies will invest, and part of the profit will return to the country. At the same time, as can be seen in the case of local telephone and car manufacturers, the domestic market, which is now quite strong, is increasingly supplied by Chinese companies, so the possibility of development is there as well, but no longer as the world’s factory.
