- Written by Will Grant
- BBC Mexico correspondent, Monterrey
The reclining armchairs and luxurious leather sofas that roll off the production line at Man Wah Furniture’s factory in Monterrey are 100% “Made in Mexico.”
These are sold to major US retailers such as Costco and Walmart. However, this company originates from China, and the manufacturing plant in Mexico is being built with Chinese capital.
The triangular relationship between the United States, China, and Mexico is behind the Mexican business buzzword “nearshoring.”
Man Wah is one of a number of Chinese companies that have moved to industrial parks in northern Mexico in recent years to bring production closer to the U.S. market. In addition to saving on transportation costs, the company’s final product is considered entirely Mexican. This means Chinese companies can avoid U.S. tariffs and sanctions on Chinese goods amid an ongoing trade war between the two countries.
As the company’s general manager, Yu Keng Wei, gave a tour of the company’s vast premises, he said the move to Mexico made economic and logistical sense.
“We want to triple or even quadruple the production here,” he said in perfect Spanish. “The intention here in Mexico is to bring production to the level of our operations in Vietnam.”
The company only opened in Monterrey in 2022, but already employs 450 people in Mexico. Yu Ken Wei said he hopes to expand the workforce to more than 1,200 people and operate several new lines at the factory in the next few years.
“People here in Mexico are very hardworking and quick learners,” Yu said. “We have excellent operators and their productivity is high. Therefore, I think Mexico is strategically very good in terms of labor as well.”
This trend shows little sign of slowing. In just two months of this year, capital investments in Mexico representing nearly half of the 2020 annual total were announced.
Man Wah sofa factory is located in Hofu Yamauchi, an industrial park between China and Mexico. The land was in high demand and all available space was sold.
In fact, Mexico’s Industrial Park Association says that all the land planned for construction in the country by 2027 has already been acquired. No wonder many Mexican economists say China’s interest in the country is not a passing fad.
“The structural reasons that bring capital to Mexico are here to stay,” said Juan Carlos Baker Pineda, Mexico’s former foreign trade secretary. “There is no indication that the trade war between China and the United States will abate in the near future.”
Baker Pineda was part of Mexico’s negotiating team for the new North American Free Trade Agreement (USMCA).
“The Chinese origin of the capital flowing into Mexico may be offensive to some countries’ policies, but according to international trade law, those products clearly originate from Mexico,” he said. said.
This gave Mexico a clear strategic foothold between the two superpowers. Mexico recently replaced China as the United States’ major trading partner, an important and symbolic change.
Mexico’s increased trade with the United States is driven by a second important aspect: the country’s nearshoring. U.S. companies also set up facilities in Mexico, sometimes after moving production from factories in Asia.
Perhaps the standout announcement came last year when Elon Musk announced plans for a new Tesla Gigafactory outside Monterrey. But the electric car company has yet to break ground on the $10 billion factory.
And while Tesla appears to remain committed to the project, it has delayed plans due to concerns about the global economy and the automaker’s recent job cuts.
But when it comes to Chinese investment, some are wary of drawing Mexico into a broader geopolitical dispute between the United States and China.
“The old rich in the cities of the United States have a problem with the new rich in China,” said Enrique Dussel of the Center for China-Mexico Studies at the National Autonomous University of Mexico. “And Mexico has no strategy for this new triangular relationship, neither under previous administrations nor now.”
With elections looming on both sides of the U.S.-Mexico border, new political considerations may be forthcoming. But whether Donald Trump or Joe Biden takes the White House over the next four years, few expect U.S.-China relations to improve.
Dussel believes that nearshoring is better defined as what he calls “security shoring,” in which the U.S. government places national security concerns above all other factors in its relationship with China. He also said that he is prioritizing it. Mexico must guard against being caught in the middle, he argues.
Amid this tension, Dussel said, “Mexico is holding up a big sign to China that says, “Welcome to Mexico!” knowing that this situation will not end well for bilateral relations between the two countries. You don’t need a Ph.D.,” he said. In the medium term, it’s the US and Mexico,” he added.
Others are more optimistic. “In my opinion, the question is not whether this trend will continue, but rather how much can we take advantage of this trend,” said Juan Carlos Baker Pineda, a former Mexican trade official.
“I think people are having similar discussions in Colombia, in Vietnam, in Costa Rica. So in Mexico, we are adjusting those terms ourselves and working with corporate and government decisions. We need to maintain this trend in the long term.”
Back in Monterrey, Man Wah Furniture’s talented Mexican seamstresses put the finishing touches on another sofa before shipping it north.
When American families buy it at their local Walmart store, they may know little about the complex geopolitics that underpins its production.
But whether nearshoring is a clever backdoor into the United States or part of a costly war between the superpowers, it is now a key advantage for Mexico in a tough era of global trade. There is.
