Since 2014 and 2015, Chinese companies started relocating a portion of their production lines to other countries in order to diversify their businesses and address the issues that supply chains have faced, which were exacerbated in 2020 and 2021 due to the COVID-19 pandemic. This is done through the China Plus One strategy.
This strategy involves companies manufacturing most of their products in China, but producing the rest elsewhere, mainly in countries with competitive costs, infrastructure, production capacity, and agile supply chains. Among the countries favored by this strategy are Vietnam, Indonesia, Thailand, and Bangladesh in Asia, while in the Americas, the most benefited country is Mexico.
Between 2021 and 2022 alone, foreign direct investment (FDI) from China for new investments set historical records, reaching $422 million and $494 million dollars, according to the Secretaría de Economía (Ministry of Economy).
With the arrival of new Chinese companies in Mexico, specialized projects have been developed, such as the Hofusan Industrial Park in Monterrey, which will exclusively host Chinese companies, including Hisense, Sunon Furniture, Skyish, Man Wah Holdings, among others.
The success of the China Plus One strategy in Mexico is attributed to the competitive advantages that the country offers, and above all, to the fact that the companies relocating coincide with the experience and quality of supply in certain industries such as automotive, electronics, energy, to name a few.
Moreover, as more Chinese companies establish themselves in Mexico, they will attract more companies to produce certain components from this country, generating a virtuous cycle for both Chinese companies and the Mexican manufacturing industry.
Competitive advantages of Mexico:
- Strategic location being close to the world’s largest consumer: the United States. Products manufactured in Mexico can reach end users within 48 hours, while those from Asia can take weeks.
- Skilled labor force. Mexico has a relatively young and trained workforce from higher education institutions.
- Trade agreements with the United States, such as the USMCA (T-MEC in Spanish).
