A Tariff-Proof Manufacturing Base
Creating a “tariff-proof” manufacturing or assembly base may become the path to building operations that are more resilient, sustainable, and embedded in the local economy. As global fragmentation in international trade continues, Mexico has become a natural fit as a favored destination to relocate investment flows that want more predictability in the medium and long term, and access to large consumer markets. In particular, China wants to partner with Mexico with those strategic goals in mind, Diana Gamboa, Communication and Media Manager of the Mexico-China Chamber of Commerce and Technology (ChAMCham), says.
A Rising Tide of Chinese Investment
China has become the third-largest country of origin for investment announcements in Mexico. Mexico’s Ministry of Economy reports that more than 1,000 Chinese companies have been registered in Mexico under the foreign direct investment regime. The Mexico-China Chamber of Commerce and Technology estimates that the figure is between 4,000 and 5,000 when accounting for representative offices, distributors, and commercial intermediaries. This indicates not only an expansion of Chinese presence but an even greater deepening of Chinese operations in the Mexican economy.
Trade Realignment and Strategic Diversification
José Manuel Salazar Xirinachs, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), believes the world is experiencing a realignment of global trade, “above all as a result of policy changes adopted by the United States, and particularly its China policy.” In this new investment context, diversification is the approach. But diversification is hard in the Mexican case since the economy is still predominantly anchored to the United States. As Finamex Casa de Bolsa Chief Economist Víctor Gómez Ayala explained, 80% of exports are destined for U.S. markets, while a greater share of imports comes from Asia. However, in this geopolitical moment of caution, Asia is not the most strategically attractive partner.
Moving Beyond Assembly to Strategic Integration
Nevertheless, China wants to partner with Mexico to develop an integrated production base that can serve global markets and leverage the country’s specific trade and investment advantages. Mexico’s critical mass in industrial sectors such as aerospace, medical devices, software, and advanced manufacturing clusters is a strong draw. Industrial clusters generate virtuous circles that pull in more investment and talent, strengthen the supply chain, and further embed a value-added manufacturing base.
Ten years ago, China saw Mexico almost exclusively as a low-cost assembly base to access the U.S. market. Today, it’s clear that China wants to partner with Mexico in a more strategic, long-term way. Gamboa highlights the fact that Chinese companies have stopped thinking only of Mexico as a staging ground for exports to the U.S. market, and increasingly, see Mexico as a market in itself. “The reasons that Chinese companies are coming to Mexico,” Gamboa says, “are not only for geographic reasons. Mexico has free trade agreements with over 50 countries, and the North American market is a preeminent platform from which to access the rest of the world. At the same time, it also has macroeconomic stability, competitive costs, and a young and skilled labor force.” China’s evolving relationship with Mexico reflects the way investment is being redefined in response to a global fragmentation of international trade. It’s no longer enough to plug into global value chains that are themselves vulnerable to disruption, be that from tariffs or sudden shifts in policy. Chinese companies want direct access to North America’s production ecosystem by physically embedding in the region.
Geopolitical Sensitivities and the U.S. Factor
But of course, this increasing alignment also raises acute political concerns. Alberto Quiroz, Public Affairs Manager at Integralia, points out the fact that the United States is increasingly sensitive to Chinese investment that attempts to use Mexico as a platform to evade tariffs or other restrictions on Chinese imports. “It is an issue that will become even more important,” Quiroz says, “during the upcoming period of review of the United States-Mexico-Canada Agreement (USMCA).” However, he concedes that it represents a political dilemma: on the one hand, “productive investment is welcome regardless of origin, as long as it has the potential to become a key part of the national economy.”
Major Chinese Enterprises Embedded in Mexico
Examples of large Chinese enterprises that are already operating in Mexico and investing in manufacturing operations abound. Among them, firms like Hisense, Minth Group, Huawei, Kuka Home, Hangzhou XZB, JAC Motors, Changan, ICBC, Honghua Group, and many others are not just investing in Mexico, but are beginning to treat the country as a strategic market in its own right. And all of this is creating the foundation for more long-term integration.
The BYD and Dragon Mart Cases
BYD, an electric vehicle manufacturer, is a case in point. Rumors in China said the project in Mexico would be canceled, but in fact, Gamboa confirms it is going forward, but in a measured way: that is, with a scale that is more in line with current operating conditions. “A more pertinent example, given the current circumstances, could be the Dragon Mart project, a Chinese retail and logistics project that began in 2012 in Quintana Roo.” At the time, a number of foreign investors showed interest in coming to Mexico to invest in infrastructure projects. “The project did not materialize because of a lack of consensus among the various stakeholders,” Gamboa says. “In this regard, one of the lessons learned is that in Mexico, there needs to be coordination and consensus not only between authorities and the private sector but with local communities as well. They are also an essential part of any project, and their voice must be taken into account.”
Opportunities for Innovation and Industrial Integration
China wants to partner with Mexico, not only to develop existing infrastructure, but also to co-create innovation, logistics, and value-added production ecosystems. Mexico’s industrial hubs in booming states like Nuevo León, Guanajuato, and Querétaro are also looking increasingly attractive to Chinese companies that want to embed within a mature supply chain ecosystem. This is crucial in industries like automotive, electronics, and renewable energy, where Chinese capabilities are strong and bring both technological know-how and capital. At the same time, Mexico provides proximity to markets in North America and trade advantages.
Improving Infrastructure and Business Conditions
In recent years, Mexico has also been working to make targeted improvements in infrastructure and regulatory transparency to attract foreign capital. Industrial parks designed for foreign investors, improved energy availability, and streamlined customs procedures have all been part of this trend. As China wants to partner with Mexico, this more robust and dynamic environment becomes even more attractive.
Macroeconomic Stability as a Strategic Asset
Mexico also offers a compelling macroeconomic picture for Chinese investment. With a relatively stable inflation rate, its interest rate regime is predictable and favorable for long-term planning, and its central bank has developed credibility with investors, all of which makes Mexico a safer bet for Chinese investors seeking predictability and yield outside of Asia.
A Strategic Fit with the Belt and Road Vision
Further, Mexico’s development agenda is well-aligned with the Belt and Road Initiative (BRI) push by China’s government to expand infrastructure connectivity and economic corridors. Mexico is not a formal part of that initiative, but the spirit of that framework is well-aligned with Mexico’s long-term goals of positioning itself as a global manufacturing and logistics hub. Chinese companies are motivated to mitigate risks and access high-consumption regions like the U.S., so Latin America, and particularly Mexico, offers an attractive alternative.
Navigating the U.S.-Mexico-China Triangle
In this context, Mexico and China must also be careful not to antagonize the United States, which remains the anchor of Mexican trade and investment activity. But with strategic coordination and transparent policy frameworks, this three-way relationship can be more complementary than competitive.
Future Collaboration in Emerging Sectors
Gamboa also suggests that greater collaboration in areas of innovation, renewable energy, green supply chains, and digital infrastructure could further shape the next phase of the engagement. Chinese battery producers, for instance, are already identifying Mexican states with lithium potential for further collaboration. Cooperation on areas of AI, smart manufacturing, and 5G connectivity could further bind the two economies together and increase local capability.
A Long-Term, Value-Generating Partnership
Overall, there is no shortage of possibilities. China wants to partner with Mexico not simply to avoid tariffs or reposition its supply chains, but to become a long-lasting and value-generating force in the region. This sort of partnership can become a game-changer for the dynamics of investment and trade in the Americas, as long as all three parties align their regulatory, diplomatic, and community interests.