Get your free copy of Editor’s Digest
FT editor Roula Khalaf picks her favourite stories in this weekly newsletter.
Amid rising trade tensions between Western governments and Beijing, Chinese companies are increasingly favoring investing in countries such as Vietnam and Mexico.
At least 41 Chinese manufacturing and logistics projects were announced for Mexico in the year to March, while at least 39 were planned for Vietnam, according to the latest data from FDI Market, a subsidiary of the Financial Times.
This is the highest number of projects announced in the two countries since FDI Intelligence began tracking foreign investment news and company announcements in 2003, and both Mexico and Vietnam have now overtaken the United States as the top destinations for Chinese manufacturing and logistics projects. Thailand, Malaysia, Hungary and Egypt also saw record numbers of Chinese projects in the 12 months to the end of March.
The developments highlight how Chinese manufacturers are expanding their presence overseas even as Western multinational companies and politicians seek to end decades of reliance on Chinese factories and limit China’s role in supplying critical products.
Among China’s big investments is a factory in Mexico worth up to $2 billion announced by a local subsidiary of state-owned Shanghai Automotive Industry Corporation.
U.S. President Joe Biden’s vow last month to impose new tariffs on $18 billion worth of Chinese products has even small Chinese manufacturers considering using their limited funds to expand overseas.
As the United States imports more from countries other than China, Chinese companies are also increasing their exports to those countries.
According to Chinese customs data, China’s total exports to Mexico and Thailand will more than double to $158.7 billion between 2017 and 2023. China’s total exports over the same period increased just 49% to $3.4 trillion.
You’re seeing a snapshot of an interactive graphic. This may be because you’re offline or have JavaScript disabled in your browser.
According to the General Administration of Customs of China, exports of computer parts from China to Vietnam will more than triple to $1.7 billion between 2017 and 2023.
However, consultancy Eurasia Group noted in April that Vietnam’s huge trade surplus with the US was due not just to actual production relocation from China, but also to Chinese companies simply shipping goods through Vietnam.
“Direct import [from China] “We may be less reliant on Chinese supply chains, but you can see the indirect ways in which the U.S. continues to be involved in Chinese supply chains,” said Davin Cho, an economics professor at Dartmouth College in New Hampshire.
Audrey Liang, a sales representative at knife and tool maker Summit Enterprises, said her company has had a factory in Yanjiang, southern China’s Guangdong province, for 26 years, but is now building a second factory in Vietnam, which is due to start operating by the end of next year.
You’re seeing a snapshot of an interactive graphic. This may be because you’re offline or have JavaScript disabled in your browser.
Clients have asked Summit Enterprises to consider locating in Vietnam for “political reasons” and because of low tariffs on Vietnamese products, despite higher production costs and lower skill levels of the local workforce, she said. “If clients did not have this requirement, we would not have gone to Vietnam,” she added.
Jack Ye, a sales manager at Xiamen Oubri Manufacturing, a Chinese rucksack maker, said there were still many advantages to doing business in China, noting that production there offers better delivery times, costs and quality. But he said the company would consider setting up an overseas base if Donald Trump, who has threatened to crack down more on trade with China, is re-elected as U.S. president.
With additional reporting by Ananta Lakshmi in Jakarta Jacopo Dettoni in London
