The Commercial Relationship Between Mexico and China Is Vibrant

Last Updated on August 2, 2023

Trade between nations plays an important role in driving economic growth and fostering cooperation in today's interconnected world. The relationship between Mexico and China is one of these dynamic and promising commercial relationships. In this article, we examine the robust ties between these two nations, their trade and investment activities, and the mutual benefits they derive from their relationship. Let's examine how Mexico and China have established a vibrant commercial relationship that holds tremendous potential for both countries.

Understanding the Foundation of Mexico-China Trade

The Historical Ties

Mexico and China have shared a long history of trade dating back centuries. The Silk Road served as a vital link between the two ancient civilizations, facilitating the exchange of goods, ideas, and culture. In modern times, diplomatic relations were formally established in 1972, providing the foundation for a more formalized economic partnership.

Trade Volume and Balance

The commercial relationship between Mexico and China has expanded in The bilateral trade flow between both countries reached more than $100 billion dollars last year in 2021. This figure demonstrates that it is significantly higher than during the years prior to the coronavirus pandemic (2019). During that period, Chinese exports to Mexico represented $93 billion. The balance of trade, while in favor of China, showcases Mexico's increasing demand for Chinese products and China's appetite for Mexican raw materials and manufactured goods.

The commercial relationship between Mexico and China has expanded in The bilateral trade flow between both countries reached more than $100 billion dollars last year in 2021. Click To Tweet

Thus far in the current year, the bilateral trade flow grew by US $384 million in the first half of 2022. This figure is higher than the same period the previous year of 2021. Likewise, there is a gigantic trade deficit between the two countries by a factor of almost 7 to 1. This means that Mexico imports $ 7 dollars’ worth of goods from China while Mexico only exports $1 dollar, according to 2020 figures.

Key Factors Driving the Mexico-China Commercial Relationship

Complementary Economies

The two nations possess complementary economies, which drive their thriving trade partnership. While China is a manufacturing powerhouse with cost-effective production capabilities, Mexico has emerged as a key player in the automotive, aerospace, and electronics industries. This synergy allows them to leverage each other's strengths and bolster their economic ties.

Geographical Proximity

Their geographical proximity has also played a significant role in nurturing this relationship. The strategic location facilitates efficient logistics, reducing transportation costs and transit times. This proximity has also encouraged cross-border investments and joint ventures, enabling companies from both countries to collaborate on regional and global projects.

Trade Activities and Investment Opportunities

Exports and Imports

The lion's share of Chinese exports to Mexico is concentrated in manufacturing, specifically in the electronics sector. As for Mexican exports to China, copper ore stands out. The manufacturing industries of the two countries have grown to be among the best in the world in recent decades. Mexican and Chinese companies are competing for plants, which has resulted in an economic rivalry. However, there is an opportunity for Mexico and China to develop stronger commercial relations as a consequence of the increased foreign direct investment of Chinese companies into Mexican manufacturing plants.

It is important to note that China has been one of the most important trading partners for Mexico in recent years. According to Trading Economics data, Mexico exported a total of just under US $9 billion dollars’ worth of goods to the Asian country in 2021.

Furthermore. China's foreign trade has recovered after the pandemic affected both its exports and imports. According to China’s General Administration of Customs, commercial exchange between the two nations increased by more than 20% in 2021. 

Investments and Joint Ventures

In addition to trade, China has been a significant investor in Mexico's economy. Chinese companies have established joint ventures and production facilities in Mexico, taking advantage of its skilled labor force and proximity to the North American market. This investment influx has positively impacted Mexico's economic development and provided employment opportunities for its citizens.

Last year the commercial exchange between China and Mexico reached more than 100 billion dollars.  This is according to data compiled by the Bank of Mexico.  Of this amount, Mexico exported less than 10% of this figure to China.  In order to address the economic disparity in exports between Mexico and China, the former country must find ways to expand its sales to the latter nation.

The most exported products from Mexico to China are copper, auto parts, lead, automobiles, and pork.  On the American continent, Mexico represents China's second most important trading partner, the first being the United States. The products that Mexico imports from China in the greatest volumes are office machine components, telephones, and  LCDs.

Mexico and China compete today for the position of first commercial partner of the United States. In the first two months of 2021, Mexico regained its position as the United States' principal trading partner. US trade with Mexico covered almost 15% of the total trade that the former country had with the world.

Bilateral trade between Mexico and the United States reached more than $600 billion dollars and the US economy imported approximately $384 billion dollars of Mexican imports. Unlike the commercial relationship between Mexico and China, Mexico runs a trade surplus with its neighbor to the North. This is projected to continue for the foreseeable future.

In spite of the fact that many consider China to be the world's factory, Mexico has spent several decades developing its manufacturing and export sectors. Consequently, Mexico has been able to compete closely with developed countries.

Mutual Benefits and Challenges

Boosting Economic Growth

The flourishing commercial relationship between Mexico and China has contributed significantly to their respective economic growth. For Mexico, increased exports to China have expanded market access and revenue streams.

Some observers regard China as the leading manufacturer in the world, but Mexico has made significant progress in this area through the signing and implementation of an extensive network of Free Trade Agreements (13 with 50 countries). These commercial accords have generated significant levels of growth for the country’s export sector and have made Mexico a prime destination for foreign direct investment in the manufacturing sector.

Challenges and Resolutions

Despite the overall positive trajectory, challenges do exist. Issues such as intellectual property rights, market access barriers, and competition concerns have emerged as hurdles in their trade relationship. However, both nations have engaged in dialogues and negotiations to address these challenges and further enhance their cooperation.

Conclusion

The commercial relationship between Mexico and China has grown exponentially over the years, driven by mutual benefits, complementary economies, and geographical proximity. The exchange of goods, services, and investments has bolstered economic growth for both countries. However, like any robust relationship, it is not without challenges. Through continuous dialogue and cooperation, the two nations can forge an even stronger bond, unlocking untapped potential for both economies.

FAQs on The Commercial Relationship Between Mexico and China

1. How has the commercial relationship between Mexico and China evolved over time?

Over the years, the commercial relationship between Mexico and China has evolved from historical trade ties to a modern, vibrant partnership. Both nations have recognized each other's strengths, leading to increased trade volumes and mutual investments.

2. What are the primary products traded between Mexico and China?

China primarily exports electronic products, machinery, textiles, and toys to Mexico. In return, Mexico exports petroleum, minerals, fruits, vegetables, and manufactured goods to China.

3. How does geographical proximity benefit Mexico-China trade?

The geographical proximity between Mexico and China facilitates efficient logistics, reducing transportation costs and transit times. This proximity has also encouraged cross-border investments and joint ventures, strengthening their economic ties.

4. What challenges does the Mexico-China commercial relationship face?

Some challenges include intellectual property rights, market access barriers, and competition concerns. However, both nations are actively engaging in discussions and negotiations to address these issues and foster a more cooperative relationship.

5. How does China's investment impact Mexico's economy?

China's investment in Mexico has positively impacted its economic development. Chinese companies establishing joint ventures and production facilities in Mexico create employment opportunities and boost economic growth in various industries.