Why Chinese companies are flocking to Mexico

Chinese investments have been pouring into Mexico lately. Last month alone brought two notable ones. The government of Nuevo León, a northern state bordering the United States, announced that China’s Lingong Machinery Group, which makes diggers and other construction equipment, would build a factory that it estimates will generate $5bn dollars in investment. The same day Trina Solar, a solar-panel manufacturer, said it would invest up to $1bn in the state. Both companies and their corporate compatriots can now find a home away from home at Hofusan, a Chinese-Mexican industrial park in Nuevo León.Chinese companies’ heightened interest in Mexico dates to 2018 when Donald Trump, America’s president at the time, launched a trade war that included raising tariffs on imports from China. His successor, Joe Biden, has kept the tariffs in place. Mr Biden’s own America-first policies, such as the Inflation Reduction Act, are encouraging companies to consider “nearshoring” in North America, in large part to thwart China. The pandemic and the snarl-ups in supply chains it caused also pushed manufacturers to move closer to the American market. And setting up in Mexico has begun to look cheaper, as wages and other costs in China rise.