Nearshoring strengthens "China" as world trade leader

Moving the production base to the west “Mexico,” in particular, is seen as potentially providing a huge advantage for American manufacturers. But this view may not be as it seems. Because in fact"Nearshoring” may further strengthen China's global trade strength.

“Nearshoring” It is a word that has come back to be talked about again widely. which the meaning of “Nearshoring” is a business strategy that moves various operations Come to live in a country close to the customer And there is not much cost. But it gives good returns. In this article, we will discuss the introduction of “manufacturing” for the US market. Returning from Asia to the Western Hemisphere

The reason production was moved to the West Coast was because of the COVID-19 pandemic. Affecting China's industrial sector and a congested port situation occurred Make companies with factories in the United States Faced with a shortage of parts produced in Asia, these companies therefore require suppliers to set up factories in North America. Otherwise, you may risk losing business. In addition, there are geopolitical conflicts and rapidly rising transportation costs. It is also an important reason for exporters to move production bases.

Moving the production base to the west Mexico, in particular, is seen as potentially providing a huge advantage for American manufacturers. But this view may not be as it seems. Because in fact “Nearshoring” may further strengthen China's global trade strength

Chinese companies flock to invest in Mexico

Throughout the past 1 and a half years Chinese companies lease 80% of industrial park space in Mexico, while China's total investment in Mexico in 2565 reached USD 500 million, up from USD 300 million in 2563 and USD 200 million in 2562. In XNUMX, projects receiving Chinese investment in Mexico included the production of solar panels, EV batteries, and housing materials. For the US market

From the concept that is believed Moving production base from China It may reduce China's global manufacturing power. But it turns out that Chinese suppliers are now taking advantage of a new North American trade agreement called USMCA (United States-Mexico-Canada Agreement) to gain tariff-free access to these local markets. The agreement raised the level of local raw materials for vehicles from 62.5% to 75%, which is equivalent to If they want to sell products into the United States, companies should establish production on this side of the world.

Being a country close to the US market It's not the only reason why Mexico is attractive again. Throughout many decades Many US companies are flocking to China. to search for cheap labor But now, on the contrary, Chinese people are flocking to Mexico for the same reason. Take advantage of the fact that Mexico has one of the highest minimum wages among the 38 member countries of the Organization for Economic Co-operation and Development (OECD).

Chinese companies are also being encouraged to invest in Mexico. With the trade war between the United States and China After waiting for President Joe Biden's administration to eliminate or reduce tariffs, But there is no indication that this will change, so these Chinese businesses must decide whether to move production to North America. Or will it abandon U.S. consumers? And so the Mexican state of Nuevo Leon, especially around Monterrey, stands to benefit greatly from this migration.

Meanwhile, the number of Chinese companies expanding to Mexico continues to increase. Chinese companies accounted for 30% of the $7,000 billion in foreign investment. of those flowing into the state of Nuevo Leon, while the share for US companies was 47% in October 2564.

In addition to Chinese companies coming to produce products in Mexico. Yet another group of Chinese companies has a less complicated approach to trading. They use the method of importing products from China and stamping them “Made in Mexico” and hoping to be exempt from U.S. customs duties.

Mexico's relatively cheap labor is a big draw for manufacturers from all over the world. But what should be considered is Don't expect Mexico's workforce to remain low forever. Additionally, access to qualified labor is becoming a problem in key Mexican regions such as Monterrey and Tijiuana, and this problem could worsen. That's because manufacturers are trying to set up production near the center of the country, where many people work in agriculture. China has also sent a number of engineers to Mexico. To provide production training to local workers.

Chinese production shrinks amid gradual economic recovery

Go back and look at China itself. China's manufacturing activity unexpectedly contracted in April 2566, with the National Bureau of Statistics saying the Manufacturing Purchasing Managers' Index (PMI) fell to 49.2 from 51.9 in March and fell from 49.2 in March. 48.8 in April to 1 in May This is despite China's faster-than-expected growth in the first quarter due to growth in service sector consumption. But factory output has lagged amid weak global growth.

China's manufacturing sector, which employs about 18% of the country's workforce, remains under pressure. due to decreased world demand As a result, exporters have temporarily suspended investment and some have cut labor costs to resolve the situation. Chinese PMI surveys suggest that China's economy is recovering. But the rate of growth is slow.

The United States still imports the most from China.

However, when considering from the point of view of importing goods, the United States is considered to be the largest importer in the world. With a total import value of 3.2 trillion US dollars in 2565, an increase of 14.6% (413,700 million US dollars) from 2564, China is the number 1 supplier, accounting for 16.5% of all imported products and for the top 5 Countries in the United States The top importers in 2565 were China (US$536,300 billion), Mexico (US$454,800 billion), Canada (US$436,600 billion), Japan (US$148,100 billion) and Germany (US$146,600 billion).

It can be seen that even though there is a trend “Nearshoring” but the number of imports of Chinese goods still holds the highest position and is followed by Mexico, with a value of more than 4 billion US dollars. There may be products from Chinese companies included. which such statistics It may still allow Chinese companies to miss out on international trade opportunities and China's position as a "world factory" may become even stronger.

This is due to various uncertainties. of the world that occurs This makes moving the production base of the manufacturing company reasonable. Because it helps to manage various risks better. Companies that decide to move production base should consider many factors, such as human resources. real estate Infrastructure, costs, operating environment, proximity to suppliers and customer markets Legal and regulatory environment

In addition, competitiveness must be analyzed in comparison with many countries in various dimensions, such as the political climate. economic environment Regulatory environment Cost analysis (including various utilities and land rent) labor in the dimension of wages Educational qualifications and various skill levels and taxes as well.