China’s Growing Interest in Mexico Not Without Risks

Mexico has become a beacon for investment flows from Asian countries, particularly China. Experts note a significant increase in these flows since 2018, coinciding with the onset of the trade war with the United States. While Mexico has benefited from this trade war, it has also led to an increase in US tariffs, impacting Mexico’s economic opportunities.

Direct Investment (FDI) from China to Mexico has surged by 278% when comparing the periods of 2013-2017 and 2018-2023, according to official data from the government. Between 2013 and 2017, Chinese FDI in Mexico totaled US$437 million, whereas from 2018 to 2023, it reached US$1.623 billion, demonstrating a growing interest from China in Mexico. 

In 2017, there were 43 Chinese companies in Mexico, while by 2023, this number had risen to 68, marking a 58% increase. Despite this growing interest, China's investment still accounts for less than 1% of the total FDI in Mexico, reports Deloitte in its latest Nearshoring in Mexico study.

Business magnate Carlos Slim emphasized Mexico's potential to benefit from the trade conflict between the United States and China, highlighting the opportunity for Mexico to substitute Chinese imports, as previously reported by MBN. In 2023, Mexico overtook China as the leading origin of goods imported by the United States for the first time in 20 years. Amid escalating tensions between the two global powers, the trade deficit with China notably contracted, with imports decreasing by 20% to US$427.2 billion (MX$7,261.6 billion), while imports from Mexico remained steady at US$475.6 billion. "If Mexico can displace China once more, and even more so, it presents a win-win situation for the entirety of Mexico," said Slim.

However, experts have also cautioned that the US-China trade dispute could have adverse effects on Mexico. Recently, the United States applied tariff increases on US$18 billion worth of Chinese goods, covering electric vehicles, batteries, steel, and critical minerals. The Mexico-China Chamber of Commerce and Technology warns that increasing tariffs negatively impacts both Chinese companies and the Mexican economy. "These measures could hinder the flow of foreign investment and negatively affect Mexico's competitiveness in the global market," the chamber states.

Deloitte emphasized that in addition to China, other Asian countries have notably increased their FDI in Mexico, with Hong Kong seeing a 181% rise and Taiwan a 68.6% growth. Deloitte explained that two main groups are driving nearshoring to Mexico: US companies already established in Mexico looking to expand, and Asian companies attracted by the benefits of producing in North America while avoiding high labor expenses. Since 2021, US$39.9 billion in nearshoring-related investments have been announced in Mexico. However, 40% remain awaiting construction.