Is China Winning the Mexican Nearshoring Game? The Leaderboard of Chinese Brands in Mexico.

End of the Story:? China is highly strategic about nearshoring to Mexico, and neither the US nor Mexico are prepared.?? Chinese FDI into Mexico is part of an overall CCP policy, and they have developed a streamlined and effective process for execution.? China is rapidly achieving Scope, Scale, Integration, and Concentration.?? Hofusan Industrial Park has emerged as the major Chinese center for auto and heavy industry.? “National Champions” and high-profile electronics brands are choosing to base in Mexico City.??? The US has a decent arsenal of tools to manage Chinese trade at the US-Mexico border, but no overall strategic policy.? China is rapidly establishing Mexico as an integrated production base targeting the US market, and no one on either side of the border seems to understand the magnitude of the challenge.???

For Chinese Negotiators Tariffs, Restrictions, and Bans are Just Rules of the Game.

Chinese negotiators think about trade rules the same way they consider the rules of any game – the more you know, the stronger your competitive advantage. ??This is the 3rd wave of coordinated outbound FDI for China.? First was SE Asia, which was often based on existing networks and connections.? ?The second was Africa, which was more top-down and official.? ??

The Chinese came to North America to avoid tariffs and restriction, but as their industrial base and supply chains grow, both Mexican and US manufactures will find it very difficult to compete.? ?

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The Rules of the Game

Step 1:? Move to Mexico

The Chinese can move FDI into Mexico more or less unimpeded.? Complying with Mexican regulations isn’t any trickier for Chinese companies than it is for you.? If we just look at post 2018 (tariff) trends, we can see that the Chinese have been quick to establish Mexico as a production platform to access the US market.?

The same basic rules apply to Chinese FDI that apply to everyone else.?? Register as a local exporting company,? import under IMMEX, export under USMCA.? Mexico doesn’t pre-approve FDI with any CFIUS-type screening process.? If they aren’t involved in energy, airlines, or a few other industries that Mexico considers off-limits, then Chinese factories can start building and producing as soon as the registration process clears.?

Step 2:? Export to the US?

For the Chinese, exporting to the US takes two forms that are not mutually exclusive.?? First, they want to sell high value, branded finished goods into the US market.?? This is going to work great for brands like Lenovo, Hisense, and ZTE.? Unfortunately, companies like Huawei and BYD are facing restrictions or outright bans from the US.? That’s where Plan B comes in – filling MNC supply chains with parts, materials, and services.??

Mexican firms are more susceptible to supply chain competition, while US brands should be more worried about competition or substitution from Chinese competitors.??

The US has some good tools in place for managing China trade – but they only work in the US.?? If the EV industry is any indicator, the Chinese aren’t being scared off by US restrictions.

In the longer term, the Chinese are looking to outlast trade war tariffs and regs and set up a major export platform focused on the US market.? In the short term, there’s the Mexican market.

The List:? Chinese FDI into Mexico.

(Note on DATA and PROCESS)? It’s always tough to track Chinese economic activity, and the situation doesn’t improve in Mexico, where business journalism is not known for its hard-hitting investigative reporting.??

?Here is a list of the top 75 or so Chinese FDI efforts in Mexico, their industry, and location.??? I relied on AI for this list, so take it with a grain of salt.

I used two different approaches to minimize the risk of hallucinations.? One approach is to load Google’s NotebookLM with a wide range of relevant and timely internet data, and then conduct my analysis within the AI.? NotebookLM uses my selected sources as the universe of data from which it can draw its analysis.? While this reduces hallucinations, your analysis is only as good as the sources you can identify.?? I like NotebookLM and recommend you check it out – but be warned.? It’s an innovative, useful, simple Google tool that offers real value, so it probably won’t be around for long.

For more direct inquiry I used MS Copilot.?

I’ve done my best to fact-check and verify, but you know the drill.? Be skeptical of the AI.? ?

Automotive:

- BYD - Hofusan

- BAIC - Hofusan

- Chery - Hofusan

- JAC Motors - Hidalgo

- Great Wall Motors - Hofusan

- Geely - Hofusan

- SAIC Motor - Hofusan

- Dongfeng Motor Corporation - Hofusan

- FAW Group - Hofusan

- NIO - Hofusan

Electronics and Appliances:

- Huawei - Mexico City

- Xiaomi - Mexico City

- Hisense - Baja California

- ZTE - Mexico City

- Lenovo - Mexico City

- TCL - Baja California

- Haier - Nuevo León

- Midea - Nuevo León

- Gree - Nuevo León

- Oppo - Mexico City

- Vivo - Mexico City

- OnePlus - Mexico City

- DJI - Mexico City

Furniture:

- Man Wah - Hofusan

- Kuka Home - Hofusan

- Markor International Home Furnishings - Hofusan

Construction Equipment:

- Lingong Heavy Machinery - Hofusan

- Sany - Hofusan

- Zoomlion - Hofusan

- XCMG - Hofusan

Logistics and Transportation:

- CIMIC - Hofusan

- DiDi - Mexico City

- SF Express - Mexico City

- YTO Express - Mexico City

Industrial and Manufacturing:

- Xinquan - Hofusan

- CRRC - Hofusan

- Goldwind - Hofusan

- Sinomach - Hofusan

- China National Building Material Group - Hofusan

- China Railway Construction Corporation - Hofusan

- China Communications Construction Company - Hofusan

- China State Construction Engineering - Hofusan

- China National Chemical Corporation (ChemChina) - Hofusan

- China National Petroleum Corporation (CNPC) - Hofusan

- China Baowu Steel Group - Hofusan

- China Minmetals Corporation - Hofusan

- China Nonferrous Metal Mining Group - Hofusan

- China National Machinery Industry Corporation (Sinomach) - Hofusan

- China National Heavy Duty Truck Group (Sinotruk) - Hofusan

- China Yuchai International - Hofusan

Energy:

- China National Offshore Oil Corporation (CNOOC) - Campeche

- China Three Gorges Corporation - Oaxaca

- State Grid Corporation of China - Mexico City

- China Energy Investment Corporation - Hofusan

- China Huaneng Group - Hofusan

- China Datang Corporation - Hofusan

- China Huadian Corporation - Hofusan

- China Shenhua Energy Company - Hofusan

Textiles:

- Shandong Ruyi - Hofusan

- Jiangsu Sunshine Group - Hofusan

- Texhong Textile Group - Hofusan

- Weiqiao Textile Company - Hofusan

- Luthai Textile - Hofusan

- Huafu Fashion - Hofusan

Technology and IT:

- Alibaba - Mexico City

- Tencent - Mexico City

- JD. com - Mexico City

- ByteDance - Mexico City

- Baidu - Mexico City

- NetEase - Mexico City

- Pinduoduo - Mexico City

- Meituan - Mexico City

Final Word:?

Old-school China watchers will notice a return to bad old days of incomplete disclosure, operational opacity, and irrational levels of secrecy.? It’s been frustrating trying to track the development of Chinese nearshoring, because for every real data point, there are half a dozen rumors, rehashing of old news, and incomplete speculation.? The numbers haven’t really added up until recently, but we are now seeing some clearer trends.?? One of those trends is that Chinese brands and National Champions require their second and third-tier suppliers to move to Mexico to comply with Regional Value Content (RVC) and control supply chains.?

Both the Mexican and US governments have good reasons to cooperate on a body of policies, regulations, and restrictions, and such an effort is doubtless on some official’s list of things to do.?? But if history is any guide, Chinese industry will respond and adapt.?

Next:? The US Arsenal

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