Since 2023, a new wave of Chinese enterprises going abroad has gained momentum. According to data from the Ministry of Commerce, China’s non-financial outbound direct investments (ODI) in 2023 increased 16.7 percent year on year to 916.99 billion yuan.
In US dollar terms, ODI totaled 130.13 billion dollars in this period, up 11.4 percent from a year earlier. Although it is no longer news that Chinese enterprises are going global, this new wave of overseas expansion by Chinese companies is showing more new characteristics.
In this article, the Global Times reporters Xie Wenting and Bai Yunyi focused on Vietnam, which is close to China’s “world factory” manufacturing base camp, and Mexico, which is close to the US market, and interviewed those involved in shaping these new markets. They shared their experiences with the Global Times, saying that in this process of global industrial chain reshaping, China indeed faces many challenges, but it is precisely in this era of “great overseas expansion” that China has the potential to produce truly “world-class enterprises.”
A new pie
“There are more Chinese people here!” — This might be the biggest impression that locals in Monterrey, the largest industrial city in northern Mexico, have had in the past two years. Whether in local parks or neighborhoods, or on international flights, Chinese faces are increasingly common.
In recent years, Mexico has become a new “gold mine” for many Chinese enterprises going abroad. The “triangular relationship” between the US, China, and Mexico has given rise to the popular term “nearshore outsourcing” in Mexican business circles in recent years. Many Chinese manufacturing companies have moved their production lines to Monterrey and other cities in northern Mexico.
“It’s like a pie falling from the sky.” Hu Hai, president of Hofusan industrial park in Mexico, describes the rise of Mexico’s manufacturing industry in recent years.
“If the North American Free Trade Agreement (NAFTA), which took effect in 1994, was the first pie that fell from the sky for Mexico, then ‘nearshore outsourcing’ is the second pie,” he said.
For Chinese enterprises, the biggest significance of setting up factories in Mexico is that their products can be considered Mexican-made, thereby avoiding the tariffs and non-tariff barriers that the US has imposed on Chinese goods amid China-US trade friction.
According to the updated United States-Mexico-Canada Agreement (USMCA) signed in 2020, many categories of products exported from Mexico to the US and Canada can enjoy lower or even zero tariffs. For example, if 75 percent of a car’s components are produced in Mexico, the car can be exported to the US tariff-free.
It is worth mentioning that, compared to many other developing countries, Mexico itself has a strong industrial foundation: as early as the 1920s, American automotive company Ford set up factories in Mexico. After NAFTA took effect in 1994, many companies from other countries also transferred part of their industrial chains to Mexico.
However, a Chinese enterprise insider familiar with Mexico manufacturing industry told the Global Times that Chinese companies still face many challenges in setting up factories locally.
“Apart from the advantages in freight and tariffs, Mexico has almost no advantage over China in other areas of production,” he said. He pointed out that in terms of labor and management efficiency, supply chain differences, and raw material costs, Mexico finds it hard to compete with China.
Data from Mexican government departments show that depending on the manufacturing sector and skill level, the monthly wages of Mexican manufacturing workers typically range from $400 to $1,000. In China, this figure is about $620 to $930. In Vietnam, it is $250 to $500.
“Mexico’s unique employment environment means that companies cannot simply transfer their management models from China to Mexico,” Hu told the Global Times.
Three new characteristics
If Chinese enterprises going to Mexico are aiming to get closer to the US market, then their expansion to Vietnam is largely due to its proximity to China – the “world factory” base camp. Although it is not new for Chinese enterprises to enter Vietnam, in recent years, there have been significant differences compared to the past.
Zhang Weijie, a consultant working in the Vietnamese market, has interacted with a large number of Chinese enterprises expanding to Vietnam over the past two years. In his view, compared to 10 or 15 years ago, Chinese enterprises going to Vietnam now exhibit three new characteristics. First, manufacturing enterprises are upgrading from low value-added industries such as clothing and bags to mid-end manufacturing industries such as photovoltaics and 3C (computers, communications, and consumer electronics). Initially, they only engaged in downstream assembly in Vietnam, but in recent years, more upstream supply chains have also moved to Vietnam. Second, Chinese chain consumer brands such as Haidilao and Mixue Bingcheng have successfully established themselves in Vietnam in recent years. Third, there is the overseas expansion of Chinese technology and internet giants.
“The previous wave of Chinese enterprises going to Southeast Asian countries was mainly driven by the familiar logic of labor costs and consisted mainly of labor-intensive enterprises. However, the technical content and added value of this wave of enterprises going abroad have significantly improved,” Zhang told the Global Times. “Moreover, the brand influence of Chinese enterprises going to Vietnam this time far exceeds that of the past.”
Guo Wenchang is the deputy general manager of Ansheng Crane & Steel Structure Company. In 2020, Guo’s company, which had long exported crane equipment to Vietnam, officially purchased land and set up a factory in Hanoi, beginning production there in 2022.
“Our main customers are enterprise workshops, so we are highly dependent on them. In recent years, due to reasons such as the US imposing tariffs on China, many Chinese export factories have moved to Vietnam, leading suppliers like us to also set up factories locally,” Guo told the Global Times.
