Hola! New growth opportunities for China and Mexico

Mexico's rise as a manufacturing hub for North America is a sign that globalization is no longer driven only by cost efficiency, but increasingly by resilience, regionalization and strategic trust. In 2023, Mexico became the top source of imports for the United States, with shipments reaching about $475 billion.

For Chinese firms facing US tariffs, strategic scrutiny and pressure to diversify production, Mexico appears attractive with great cooperation potential.

But that attractiveness comes with a difficult question: How can Mexico connect Chinese industrial capacity to North American markets without being perceived by Washington as a backdoor for China into the US market?

On the plus side, Mexico has a favorable location, established trade agreements, extensive industrial experience and a deep manufacturing base. Automotive clusters thrive in Nuevo León, San Luis Potosí, Puebla, Guanajuato and Aguascalientes, electronics and medical device manufacturing is concentrated in Baja California and Chihuahua while logistics corridors connect factories with the largest consumer market in the world.

Under the United States-Mexico-Canada Agreement, Mexico is no longer just a low-cost production platform, but part of a treaty-based regional economy essential to North American competitiveness. This framework creates opportunities for China-Mexico cooperation, particularly in the automobile sector.

But Mexico's opportunities are also its constraints. An increase in Chinese investment could be politically sensitive in the eyes of the US.

In the current environment, factories in Mexico are not evaluated only as a business decision but also examined through the lenses of industrial security, trade enforcement, technological competition and electoral politics. This raises concerns that economic cooperation may become overly politicized.

The USMCA makes the distinction unavoidable. For example, USMCA rules require 75 percent regional value content for passenger vehicles and light trucks, alongside labor value content and steel and aluminum requirements. These rules were designed to deepen regional production, strengthen regional supply chains and encourage genuine industrial integration.

A company moving to Mexico should avoid superficial relocation that depends overwhelmingly on imported components.

It should comply with procedures to build the trust required for integrating into Mexico's industrial system and gaining durable access to North American supply chains.

Domestic challenges also matter. Mexico's "nearshoring narrative" often sounds stronger than its infrastructure reality. Sustainable industrial growth requires reliable electricity, transmission capacity, water, efficient customs, transportation, security and skilled labor. In several regions of Mexico, these systems are already under pressure.

The power system faces growing demand from industrial expansion, while transmission bottlenecks and uncertainty over approvals can slow investment. Water stress is another serious problem in northern Mexico, precisely where many export-oriented industrial corridors are located. Therefore, new investment should be meticulously planned to avoid worsening these bottlenecks that hinder cooperation.

For many Chinese manufacturers, investing in Mexico can be part of a broader transition from export-oriented globalization toward localized production, regional supply chains and long-term overseas industrial presence. Success requires treating Mexico not merely as a geographic solution to a geopolitical problem, but as a partner in industrial development.

A durable presence in Mexico involves working with local suppliers, training Mexican workers in higher-value processes, ensuring USMCA compliance, transparent customs practices and a willingness to integrate into the country's industrial ecosystem. Sectors such as electric vehicles, batteries, electronics, renewable energy equipment and industrial machinery offer opportunities to cultivate engineering, components, maintenance capabilities, logistics and supplier networks.

For Mexico, the implications are equally demanding. "Nearshoring" does not automatically lead to industrial upgrading. While the country has excelled in export manufacturing, it has struggled to transform that success into deeper technological capabilities and stronger domestic supplier networks. Chinese investment is an opportunity for Mexico to change that.

It must look beyond assembly based on imported inputs and use foreign investment to build capabilities in components, tooling, software, industrial services, technical education and clean manufacturing.

Achieving this requires a stronger industrial policy — not protectionist or discretionary, but focused on coordination between federal and state governments, energy planning, industrial land policy, technical training, supplier development and regulatory certainty.

It also requires clarity about what Mexico expects from foreign investors. Factories that generate employment, deepen supply chains and improve productivity should be welcomed.

China-Mexico industrial cooperation is possible if both sides act decisively. China has manufacturing scale, technology and global firms. Mexico brings location, trade access and industrial experience. These strengths can complement each other if cooperation centers on production.

If Chinese investment develops local suppliers, workers, infrastructure and long-term capabilities, it is easier to present it as part of Mexico's industrial development.

That distinction is crucial because it will define the future of the trade relationship. Mexico can connect China's industry to North America, but not as a shortcut.

A more durable path would be slower, more demanding and more institutional: investment rooted in Mexican capabilities, compatible with North American rules and credible to all three USMCA partners. If that happens, it would make Mexico a bridge that links Chinese industry to a more resilient and interconnected North American economy.

Paul Alejandro Sánchez Campos is an associate professor at the School of Engineering and Sciences at Tecnológico de Monterrey and Guo Yifan is a research fellow at the Center for Spanish — and Portuguese-Speaking Countries at Fudan University.

The views don't necessarily reflect those of China Daily.