China emerges as a good trade and investment partner for Mexico

Once the trade agreement between Mexico, the United States and Canada (T-MEC) is in force, China can become the most important investor in the Latin American country.

China puede convertirse en el más importante inversionista en el país latinoamericano, indicó la subsecretaria de Economía Luz María de la Mora.
China puede convertirse en el más importante inversionista en el país latinoamericano, indicó la subsecretaria de Economía Luz María de la Mora.

Mexico already imports from China machinery, equipment, and semi-finished products, which depending on the cases, could go to the United States, Canada and other parts of the world.

In that role, it can be part of the new government's efforts to delineate the commercial pillars of innovation, inclusion, and diversification. Some supplies could come from China, others are Mexican, and the idea is that the North American production chain continues to grow.

Mexico already imports from China machinery, equipment, and semi-finished products, which depending on the cases, could go to the United States, Canada and other parts of the world.

Mexican exports also contribute to the promotion of ties between the United States and China, since part of the Chinese capital in the United States participates in the Mexican productive process and the finished products go to the United States.

Other commercial items are auto parts, steel, and iron or electronics, which together has made Chinese capital go from seven billion dollars in 2000 to 90 billion in 2018.

Mexico and China have common interests in global affairs and both are members of several multilateral organizations such as the International Monetary Fund (IMF), the World Bank, the United Nations Organization or the Group of 20 (G20).

In food and agriculture, Mexico is advancing sanitary protocols that allow it to export sorghum and bananas to China, which will be added to current sales of tequila, avocados, red fruits or pork, among others.

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Mexico-China trade amounts to 85 billion dollars in 2018

In 2018, bilateral trade between Mexico and China reached 85 billion dollars, of which 76 billion was the product of the importation of goods from the Asian nation, and about 9 billion Mexican exports; an amount that represented an increase of 32 percent in the last five years.

This was reported by Jorge Macías Jiménez, president of the National Chamber of Commerce, Services and Tourism (Canaco-Servytur) Tijuana during a meeting he held with the government delegation of Shandong Province, China. Meeting where they explored investment and trade opportunities; besides visualizing areas of economic cooperation that contribute to the development and well-being of both communities.

The leader of the Tijuana merchants assured that "we are in an excellent time to resume our commercial relationship, since the president of Mexico, Andrés Manuel López Obrador, has foreseen in this region a series of public policies and government measures that will create an environment more competitive to the productive activities, that at the same time will be an incentive to the foreign investment and development of strategic projects ".

In a statement, it was detailed that Macías Jiménez thanked the members of the Chinese delegation for their visit, and urged them to make their investments in Tijuana, in order to join new areas of cooperation and business opportunities in the Cali-Baja region.

At the meeting attended by Bernabé Esquer Peraza, Secretary of Economic Development of Tijuana; Carlos Arturo Higuera, president of Deitac and Zhang Xingchen, Secondary Inspector of the Provincial Department of Commerce of Shandong - the Chinese businessmen showed their gratitude to the Mexican authorities for the support they have received so far, and exposed the interest of investors of the nation Asian to open more business in Tijuana.

Experts consider that Mexico has space to receive investment from China

Mexico has space to accommodate investment from China and interest in taking advantage of the opportunities that arise, experts said, agreeing on the need to review and improve the relationship with the Asian country.

Undersecretary for North America of the Secretariat (Ministry) of Foreign Affairs (SRE) of Mexico, Jesús Seade, considered that it will be convenient for the country to improve its level of association with China through investment, instead of traditional Commerce.

"Chinese investment will grow gigantically in the production chain to address the US market, which is the largest in the world for them," said Seade on the sidelines of the event on the Mexico-United States-Canada Treaty (T- MEC) of free trade called "The commercial relationship in North America and the fate of the T-MEC", held this week.

"Then that Chinese interest to invest in Puerto Rico, Costa Rica, or to see where to export to the United States, we want it to be in Mexico," said the official.

According to his estimates, China could be the source of 75% of the total Foreign Direct Investment (FDI) of the world in the next 10 years.

In such a way that Mexico should concentrate more on China as a strategic partner since the success of a trade association with the United States, its neighbor and main participant in business matters is already guaranteed.

"There is a gigantic space in which we can try to accommodate China, in a closer relationship, especially in investment," said Seade, who was part of the negotiating team of the T-MEC.

"I think that it is increasingly inappropriate to concentrate exclusively on commercial issues, commercial flows or commercial problems, in a world in which more and more the relationship of countries takes place via investment".

According to the most recent data from the Mexican government, the FDI that Mexico received from China was 250 million dollars in 2018, while in the United States it received 12,274 million dollars.

The partner in Washington of the consulting firm Baker McKenzie, Miguel Noyola, considered that Mexico is in a very privileged position to have agreements with different regions, with a view to strengthening its productive export plant.

Mexico sends about 80 percent of its exports to the United States, but the Administration of President Andrés Manuel López Obrador, who took office on December 1, has proposed to diversify its destinations, including China.

With the T-MEC, a modern version of the North American Free Trade Agreement (NAFTA) that has governed since 1994, will open more export advantages, which could attract more investment from China.

"That's going to affect many industries here in Mexico, like final manufacturing, like vehicles or medical devices, in the agri-food industry and so on," Noyola said.

"I see that there is a very good opportunity (for Chinese investment) if things are done well and if the Government of the United States resists the nationalist temptation to apply more tariffs."

For his part, the former Undersecretary of International Trade Negotiations of the Ministry of Economy, Jaime Zabludovsky, indicated that Mexico should understand its link with China differently from other South American countries that are exporters of raw materials.

"But Mexico must undoubtedly take advantage of the investment opportunities that China is looking for," said the expert.

With the initiative of the Strip and the Road, launched in 2013, China is focused on the construction of infrastructure and trade networks to seek development and common prosperity.

Several countries in Latin America such as Brazil, Bolivia, Chile, Peru, and Venezuela have gradually joined the Chinese initiative, of which Mexico is not yet a part.

The coordinator of the Strategic Negotiations Advisory Council of the Business Coordinating Council (CCE), Moisés Kalach, agreed that now is a good time to increase interest in China.

"I agree with the concept of Chinese investment, and I agree that the relationship with China has to change," said Kalach, who was also part of the renegotiation of the T-MEC.

In 2013, Mexico and China agreed to increase their bilateral link to an Integral Strategic Partnership.

Mexico China commercial relationship represents 90 billion dollars per year

Mexico needs to strengthen its position, leadership and prestige worldwide, in addition to diversifying diplomatic relations, commercial ties of investment, tourism, and culture with key regions such as Asia, said Senator Cora Cecilia Pinedo Alonso.

During the Conversation "Towards a strategy between Mexico-China," the PT legislator pointed out that the Legislative Branch should contribute to the integration of State policy, a robust and concrete agenda that strengthens ties with the Asian giant.

The current administration seeks to open a new chapter in bilateral ties. Thus, it aims to strengthen the political-commercial relationship and strengthen it in areas such as tourism, education, science and technology, and in the socio-cultural field.

In turn, the extraordinary and plenipotentiary ambassador of the People's Republic of China in Mexico, Qiu Xiaoqi, assured that China is willing to work firmly and with the greater effort with Mexico to improve bilateral relations in different sectors.

One of them, he said, is tourism, which represents an opportunity to strengthen ties between both nations. In the Asian country, there are 200 million Chinese who belong to the middle class and also seek an option for recreation in tourism. In this sense, he continued, there are already direct flights between Mexico City and China.

We have to unite to promote greater reciprocal investment. Although Mexico is the second commercial partner of China in Latin America, it is not a major recipient of investment at a global level, the diplomat explained.

On the other hand, the undersecretary of Foreign Trade of the Ministry of Economy, Luz María de la Mora Sánchez, affirmed that Mexico is looking to strengthen a commercial relationship, which represents 90 billion dollars, per year. Mexico exports 7 billion dollars and has a Chinese investment of one billion dollars in that currency.

China and Mexico seek trade expansion

China's financial and business institutions assured that there is an excellent environment for China Mexico investment and announced that they are looking to help with large-scale projects and increase financing for Mexican companies.

In the framework of the celebration of the 70th anniversary of the founding of the People's Republic of China, in the Mexican Senate, the president of the Industrial Bank of China in Mexico, Chen Yaogang, informed that since this financial institution was established in Mexico, in 2016 , has awarded more than 800 million dollars in financing. That figure, he said, is expected to reach two billion dollars in the next five years.

Yaogang announced that this bank has the firm conviction to explore new business areas to promote bilateral China Mexico trade and investment, provide more funds and credit support to Mexican companies, and help in large-scale projects to generate more jobs and capital in both countries

It should be remembered that until the end of the first half of 2018, China's investment in Mexico reached 153.7 million dollars, while the accumulated from 1999 to 2018, is one thousand 26 million dollars, according to the Association of Employers of Zhongua in Mexico.

In a statement, it was stated that later, the president of the Bank of China in Mexico, Xin Shawen, highlighted the excellent investment environment that exists in the country and the great opportunity it represents.

"We want to support Chinese companies to invest here."

He said he met with representatives of more than 10 high-ranking companies in his country "to discuss whether to come and invest in Mexico" and recalled that this bank helped more than 50 national companies to enter more Mexican products into the Chinese market.

In turn, the charge of the business of the Chinese Embassy in Mexico, Lin Ji, trusted that the Foreign Investment Law in that country is approved, which implements policy measures of greater openness to the outside and protection of investments in the Asian country.

This, he said, is of great importance because it will generate economic and social development for the nation, and at the same time the various countries, including Mexico, will have the protection of their investments.

The adviser to the general direction of political coordination of the Ministry of Foreign Affairs, Jorge Luis Olivares, highlighted the interest of Mexico to strengthen ties of friendship with China, especially to strengthen the tourist image through embassies and consulates.

In turn, Liu Shuangya, general director for Latin America of China Today Magazine, considered that this meeting will allow exchanging information about both countries to further strengthen ties in the future.

In turn, the president of the Foreign Relations Committee, Héctor Vasconcelos, assured that China is one of the countries with the greatest interest for Mexico.

"The whole range of relationships puts that country at the center of our contacts with the outside world."

There would be more China Mexico investment 

Chinese companies could be more interested in making investments in the Mexican market, derived from the trade war between that Asian nation and the United States, projected the United Nations Conference on Trade and Development (UNCTAD).

China has a relatively new history with outgoing investment. In 2001, it initiated its "exit" investment strategy that encouraged state companies to go abroad and acquire mainly energy investments that helped facilitate greater market access for Chinese exports to foreign markets.

As Chinese investors gained experience and China's economy grew and diversified, China's exit investment strategy also changed to include investments from both state and private companies in multiple economic sectors.

Now China is one of the largest direct investors in the world. While it reported a decrease in outbound investment in 2017 compared to record investment levels in 2016, some third-party data suggest that the actual global outbound investment figures in 2017 were on par with global investment levels of 2016.

If business performance and confidence deteriorate due to ongoing commercial disputes, changes in investment plans could be generalized, including not only lower capital expenditures, but also reallocations of production and employment in all countries.

"Some Chinese manufacturers may consider moving their production to other countries that are not affected by tariffs, such as Mexico or Vietnam," UNCTAD said in its report, "Situation and prospects for the world economy in 2019," released on Monday.

The most significant changes in Mexico's investment outlook have occurred in the energy and telecommunications sectors. Before the constitutional reforms of 2013/2014, the state-controlled oil company, Pemex, had a monopoly on all hydrocarbon activity in the country.

Mexico and Vietnam are part of the Trans-Pacific Partnership and Progressive Treaty (CPTPP), an FTA between 11 nations that entered into force on December 30 for the Mexican economy and January 14 for the Vietnamese economy.