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Mexico-China trade and investment

Monday, April 22, 2013

Two countries, which often compete in exporting products to the United States, could find new opportunities for bilateral business.

The possibilities would be even greater, if Mexico and China were to enter into some form of free trade agreement, a topic discussed during a visit to Beijing earlier this month by President Enrique Peña Nieto.

Even without a trade deal, Mexico is becoming important for Chinese businesses, which send components to Mexico for assembly.

If the process involves a transformation of the materials involved, the finished product can be imported duty-free to the United States, under the rules of the North American Free Trade Agreement.

Another advantage of this arrangement for Chinese companies, is that Mexican production is increasingly competitive, given the steady increase in the value of the yuan, which today is worth 13% more than it was five years ago.

For its part, the value of the peso during the same period has – except for a few brief spikes or plunges – not moved far from its average price of 13 to the dollar.

A major challenge for Mexico involves selling its products to China, from which it buys nine times as much as it sells.

By comparison, the United States trade imbalance with China is only four to one.