China's supply chain strategy to benefit US

In strategically expanding its manufacturing to North America, China offers substantial benefits for the US, host countries such as Mexico and the global trade system, a supply chain expert says, a move he calls "mutually advantageous".

This trend, known as nearshoring, involves relocating manufacturing closer to end markets. It has recently gained wide attention from industry experts who believe it is reshaping global production and distribution.

"By integrating on a local or nearshoring level, China is able to weave its methodology, standards, investment and distribution of products and philosophy on the microeconomic level, country by country, continent by continent," said Kerim Antoine Kfuri, founder of the US consulting firm The Atlas Network, which specializes in mass production, logistics and supply chains.

"China is always willing to evolve, adapt and seek out opportunity on a global scale. This is evident in the high level of foreign investment and global infrastructure built by the Chinese in the far corners of the globe," he said.

"The Chinese are practitioners of true globalization and the modernization of the same philosophies that led to the creation and proliferation of the Silk Road from the second century until the mid-15th century."

The United States stands to gain significantly from China's nearshoring strategy, Kfuri said. The presence of nearshored Chinese manufacturing can lead to more secure and reliable supply chains, potentially lowering costs for consumers and mitigating inflation, he said.

Other benefits of nearshoring include improved supply chain efficiency and responsiveness, economic growth and job creation in host countries, and technology transfer that contributes to a more interconnected global trade system, Kfuri said.

Driving growth

Host countries such as Mexico and Central American nations are poised for substantial benefits, he said. For instance, foreign direct investment, or FDI, through nearshoring drives broader economic growth by fostering infrastructure development and bolstering other sectors.

This influx of investment and industrial activity translates into new job opportunities and greater economic stability for these regions, Kfuri said.

A recent report by the Federal Reserve Bank of Dallas confirmed this observation. The report highlights a significant increase in Chinese companies' presence in Mexico, evidenced by a surge in Chinese FDI directed toward manufacturing plants.

Chinese FDI in Mexico rose from $38 million in 2011 to $386 million in 2021, becoming the fastest-growing source of the latter's foreign investment, the report said.

The FDI "boosts Mexico's economic growth through job creation, incentives for human capital development and technology transfers", it said.

This, in turn, can potentially address the root causes of economic migration to the US by offering residents greater opportunities within their home countries and potentially slowing the exodus of economic migrants to the US, Kfuri said.

Through nearshoring, China is expanding "Chinese manufacturing expertise" to the host countries, he said.

"By establishing manufacturing hubs in nearshore countries, China transfers its efficient production capabilities, knowledge and technology, spurring economic growth, job creation and industrial development in these regions."

China's nearshoring strategy plays a crucial role in building "a balanced and resilient global supply chain" and provides a model for collaboration between countries to drive economic growth, he said.

He argued against the notion of "de-risking" from China, instead advocating for continued cooperation between the US and China.

"I believe it will improve efficiency, reduce costs and spur global GDP," Kfuri said. "I also believe that the effect is truly positive as China's nearshoring efforts in the US and other places in the world will create jobs, promote local economies and establish efficiencies which holistically heighten global trade."