China's backdoor entry into the US via factories in Mexico

Many industrial Chinatowns have sprung up in Mexico, displaying the flag of the People's Republic of China and putting up signs in both Chinese and Spanish, as part of China's commercial expansion strategy, CNN reports.

Many of these Chinese factories have sprung up in Monterrey, transforming vast tracts of agricultural land into large industrial complexes that manufacture everything from electronics to furniture to car parts.

Photo: Unsplash/brock-wegner

China's investments in Mexico have not only boosted the economic development of the local regions hosting their factories, but their presence has also contributed to the growth of the national economy.

Xi Jinping's expansion is due to the phenomenon of nearshoring, a strategy used by companies to transfer part of their production to other countries, usually places close to the importing countries with parallel time zones.

"Chinese companies are going to diversify their assets without leaving their territory. They are investing in other countries to protect their production chains and are choosing Mexico due to its geographic and commercial proximity to the US," an expert told CNN.

Photo: Unsplash/xyzcharlize

Chinese companies want to enter the US market from Mexico to avoid tariffs, thanks to the T-MEC trade agreement, a treaty signed between Canada, Mexico and the United States.

This agreement encourages investment and free trade between these allied countries. But the treaty will be reviewed this year and Canada has requested the exclusion of Mexico, arguing that it is being used as a base for China to export cheap goods, Reuters reports.

Mexican President Claudia Sheinbaum has responded by saying: "The US has many imports from China. Canada and Mexico too. We have a plan to replace most of those imports from China with goods produced in Mexico."

Donald Trump's arrival in the Capitol is worrying Mexico, given the President's announcement that he would raise tariffs. If trade restrictions are imposed, Chinese companies based in Mexico will also suffer.

Chinese companies in Monterrey, for example, are located 250 kilometers from Texas and their products arrive in the US within 24 hours, a logistic that greatly benefits the Asian giant.

Chinese investment in Mexico has increased from $5.5 million in 2013 to $570 million in 2022. The most recent data for the first six months of 2024 show direct investment from China to Mexico of $235 million.

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