Shunned by US, China investors use Mexico to keep grip on North American market

New-energy giant Tesla’s reported demands of Chinese suppliers to support upcoming Mexican ‘gigafactory’ show how firms are shifting supply chains amid geopolitical tensions

But risks to China in Mexico include unionised factory labour and the public perception that Chinese enterprises are competitors, according to analysts

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Since the early 1900s, people from China have gone to Mexico to work and invest, and many lived in the Chinesca neighbourhood in Mexicali. Photo: AFP

Ralph Jennings,Beata Mo,Lo Hoi-yingandMia Nulimaimaiti

Published: 8:00pm, 12 Jun 2023

China has pledged to defend its supply-chain dominance with a new grand expo planned for November, but for now its endeavours remain haunted by the reality that many multinational companies are reshoring, and that even some Chinese firms caught in geopolitical fragmentation have headed as far as Mexico to secure orders.

The latest sign of decoupling derives from new-energy vehicle giant Tesla, which has reportedly demanded that Chinese suppliers set up plants in Mexico to support its proposed next-gen “gigafactory” there. Tesla already has a gigafactory in Shanghai, and Chinese leaders rolled out the red carpet for CEO Elon Musk when he visited last month.

Meanwhile, China is investing heavily in Mexico and augmenting supply chains there to get around US trade curbs into the American market, analysts say.

Chinese enterprises have poured US$20.84 billion into Mexico-based projects since 2008, and about US$8.29 billion of that total has arrived since 2018, according to data from Latin America and the Caribbean Network on China research portal.

The US-China trade war that began in 2018 has resulted in hundreds of billions of dollars worth of tariffs being placed on two-way shipments, prompting Chinese exporters to recalibrate their international supply chains.