Mexico-China Trade & Business Relationship

Over more than four decades of diplomatic relations, Mexico and China have established the basis of a relation of friendship, dialogue, and cooperation that has allowed them to move forward to strengthen a diverse and inclusive agenda.

Mexico-China Trade & Business Relationship

China: Trade Overview

Trade has become an increasingly important part of China’s overall economy, and it has been a significant tool used for economic modernization. Thanks to its enormous trade surplus over the past few years, China has become the world's largest exporter and ranks second among the world’s largest importers. Despite its strict policies, the country is fairly open to foreign trade, which represented 38.2% of its GDP in 2018.


By 2018, China's total trade in goods had jumped to $4.6 trillion or 12.4% of global trade.


The value of China’s exports in goods annually surpasses the amount it imports from the rest of the world.1 In 2018, China exported $2.49 trillion in goods while it imported $2.13 trillion. The majority of China’s surplus comes from trade with the US and Hong Kong.


The country's main partners are the United States, Hong Kong, Japan, South Korea, Vietnam, and Germany. Increasing tensions in the U.S. – China economic relationship have heightened business uncertainties, given that the US is the country's main trade partner.


Despite these trade tensions, China’s trade with the US expanded in 2018 compared to 2017, and its exports to the US reached record levels. China exported $480 billion worth of goods to the US in 2018 (19% of all its exports), but only imported $156 billion (7.3%of all its imports).


China’s trade with the rest of the world is more balanced. When excluding trade with the US and Hong Kong, China exported $1.71 trillion and imported $1.97 trillion in goods in 2018.


As reported by WTO, exports of goods in 2018 were USD 2,486.7 billion and imports USD 2,135.7 billion, while exports and imports of services in 2018 reached USD 265 billion and USD 520.6 billion respectively. China reported an overall 19.5% increase in exports and 18.7% rise in imports for 2018. According to the World Bank data of 2018, China's trade surplus for goods stood at USD 395.2 billion, a decline from USD 475.9 billion in 2016. The overall trade balance (including services) was USD 103 billion.

Mexico-China Trade & Business Relationship

Why China?

Trade: 11% of global good trade

Firms: 110 Global Fortune 500 companies


Capital: Top 3 financial system


People: 150m outbound trips

Artificial Intelligence: 52.4%+ patent applications in 2019

Electric cars: 1/2+ of global sales

Technology: 2nd in the world on R&D spending

Data: 802m internet users

Environment: 45% of global renewables investment


Culture: 2nd largest box office in the world

Vegetation: 1/3 of world’s new vegetation

GDP: 10% growth a year

Mexico-China Trade & Business Relationship


China’s Economic Rise

China is an upper-middle-income country and the world’s second largest economy.


In the last 40 years, China's GDP growth has averaged almost 10% a year, and more than 850 million people have been lifted out of poverty. In 2018, the ratio of China's contribution to global economic growth was 27.5%.


In 2018 China was the number 1 in total exports, the number 2 in total imports, and the number 30 most complex economy according to the Economic Complexity Index (ECI).


The GDP in China was worth 14.343 trillion US dollars in 2019.


The GDP value of China represented 16.34% of the world economy.


In 2019, GDP per capita was USD 10,261.679.


The GDP per capita (PPP based) was reported at USD 16,784.7 in 2019, one of the highest in the world.


Gross domestic savings (% of GDP) in China was reported at 44.94% in 2018, and it was a significant factor in China's economic growth.


China will be the only major economy to achieve growth this year, according to the IMF's latest report in October. The IMF projects that China's GDP will grow by 1.9% in 2020. The report forecast that Chinese economic growth will reach 8.2% in 2021, unchanged compared with its June outlook. (Forbes)


Data from the World Bank and IMF predicts China will overtake the U.S. as the world’s largest economy by 2024.

Mexico-China Trade & Business Relationship

Foreign Direct Investment

FDI inflows continued to increase between 2018 and 2019, from USD 138 billion to 141 billion (+2%).


In 2019, China was ranked the world's second largest FDI recipient with FDI inflow up 5.8% year on year to $136.71 billion U.S. dollars. China’s outbound direct investment (ODI) declined 8.2% to $110.6 billion in 2019.


Strong points for FDI in China

  • The largest internal market in the world, with 1.44 billion potential customers.

  • Sovereign risk contained as public debt remains mainly domestic and denominated in local currency.

  • Importance of foreign currency reserves and public debt owned by Chinese government and individuals.

  • A well-developed production sector (manufacturing sector and heavy industry).

  • A favourable geographic location (close to emerging Asian markets, to Japan, maritime frontage).

  • Top economy in terms of purchasing power parity (PPP) thanks to rapid growth of the economy.

  • Labour costs remain comparatively low, although the situation is changing in certain areas.

  • New opportunities with the development of the western provinces (particularly Sichuan province)

  • Development of a new export network (Silk Road network).

Chinese investments in Mexico

From 1999 to 2019, the total investment from China registered in Mexico was 1247.5 million dollars, which represents 0.2% of the total Foreign Direct Investment received by Mexico in the same period. It is also worth emphasizing that 46% of China's investment in Mexico goes to the manufacturing sector.


At least 10 Chinese companies show interest in the requirements to settle in Mexico every month, according to the executive president of the Mexico-China Chamber of Commerce and Technology.


Potential Sectors for Investment

  • Automotive

  • Aerospace

  • Information Technology & High-Tech Parks

  • Energy

  • Agriculture & Agribusiness

  • Mining

Mexico-China Trade & Business Relationship

China-Mexico: A Successful Relationship

China is:

  • 2nd largest trading partner of Mexico

  • 3rd largest destination for Mexican exports

  • 2nd largest source of Mexican imports


While Mexico is the 2nd. largest trading partner of China in Latin America.


In 2019, bilateral trade was worth 90.183 billion U.S. dollars. Mexican exports amounted to 7.13 billion U.S. dollars and imports totaled 83 billion U.S. dollars.


From 2015 to 2019, agricultural and fisheries bilateral trade grew at an average annual rate of 18% and mexican products are increasingly entering the chinese market, represented by avocado, blueberry and tequila.


Faced with the situation caused by the COVID-19 pandemic, in the first half of the year Mexican exports to China grew by 3.4% and Chinese direct investment in Mexico grew by 160%.

Mexico-China Trade & Business Relationship

Moving Forward

Nexus is ready to help your company to do business with China and make your operations in North America more agile. Our team of experts designs integral supply chain solutions that are able to export and import your products to and from China in the most timely, cost-efficient, and secure way through any one of Mexico’s and the US’s air and sea ports of entry.


Furthermore, Nexus consultants are the ideal partners for Chinese companies in North America - whether you are seeking to improve your operations, expand existing operations, or are interested in establishing a presence for the first time. Our team is fluent in Chinese and present in Shenzhen to better serve our clients in the region.


DOWNLOAD REPORT


Sources: Center for Strategic and International Studies, Santander, World Bank, The Observatory of Economic Complexity, World Economic Forum, UNCTAD, CNBC, Mexican Government, Forbes, Chinese Embassy in Mexico