China’s Mexico investment may dwarf official figures, with estimated US$13 billion in play

As Chinese companies avoid US-imposed tariffs, investment in Mexico has exploded – far more what official numbers show, researchers say

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Chinese investment in Mexico has risen quickly as the Latin American country’s value as a means of bypassing US tariffs becomes more apparent. Photo: Siqi Ji

Published: 9:00pm, 10 Oct 2024

Chinese investment in Mexico – widely perceived as a handy detour around US-imposed tariffs – could be six times more than what is reflected in official data, a risk consultancy estimated in a report released on Thursday.

The Washington-based Rhodium Group has turned up more than 700 completed foreign direct investment transactions from China to the Latin American nation with a cumulative value US$13 billion. Both figures, if accurate, would overshadow official tallies of investment stock – the total accumulated level of direct investments.

Chinese investments mostly take the form of factories that produce motor vehicles, electronics and consumer goods. Many use Mexico’s land border with the US to transport products, bypassing tariffs former US president Donald Trump imposed on direct shipments from China as part of a wider trade war.

“Although it represents a relatively small portion of total foreign investment, Chinese FDI in Mexico is significantly higher than shown in official statistics,” the Rhodium Group said in its China Cross-Border Monitor report.

“While some Chinese firms are eyeing the local Mexican market, overall investment appetite will be shaped by market access to the US.”

Newly announced investments from China have averaged 13 major transactions per year since 2015, worth an average total of US$1 billion for each year through 2020, report authors said. Automotive investments were projected to represent three-quarters of the 2023 total, with parts manufacturers being a particularly substantive source of growth.