Mexico and China: A Renewed and Vigorous Bilateral Relationship

By: José Luis Bernal, Mexico's ambassador in China  

Mexico and China: A Renewed and Vigorous Bilateral Relationship
  Ambassador José Luis Bernal, outstanding foreign affairs specialist with over 40 years’ experience in the Mexican Foreign Service, shares an account of the actions carried out in recent years to strengthen the bilateral relationship between Mexico and China, and of the opportunities that open up to boost trade flows and investment, and cooperation between both nations.  

 

The relationship with the People’s Republic of China is fundamental for Mexico given the growing dynamism of bilateral exchanges, the profound transformation that this country is experiencing, and its global influence. Since the beginning of 2020, with the expansion of the COVID-19 epidemic, the importance of this link has been evident in the actions undertaken between the two countries to face the health emergency and address the systemic consequences of the pandemic.

For several years, China has been one of Mexico’s main trading partners and the first among the Asia-Pacific countries. It is the second source of imports and the third destination of Mexican exports; an increasingly important country of origin of direct investments in our country, and is a growing source of technologies, financing, and tourism. Mexico is also relevant for China: it ranks second in importance in this country’s relations with Latin America, and is among the top eight most relevant markets for its exports.

The sustained increase in exchanges has been due to the evolution of Mexico’s economy, society, and foreign policy, and is closely linked to the production and social transformation registered by China in recent decades. China’s economic development experience is the most remarkable case in history. In relatively few years, it has become the second world power, the largest economy on the planet in terms of purchase parity, and the country with the highest participation in international trade. It is also leader in several cutting-edge sectors of the fourth industrial revolution. The Chinese economy, despite the notable global slowdown derived from the COVID-19 pandemic, maintains a positive trend, continues to improve its human development indicators and has managed to eradicate poverty in huge population groups. This nation, as a reflection of its achievements, also assumes increasingly assertive and influential positions in different areas of the international agenda.

The sum of all these aspects supports the priority attention that, in the daily exercise of foreign policy, we give to the evolution of this country and to the numerous chapters of our bilateral relationship. The economic, social, and geopolitical ties characterize a relationship that aims to grow stronger in the medium and long term.

 
JOSÉ LUIS BERNAL

 

THE CONSTRUCTION OF THE MEXICO-CHINA COMPREHENSIVE STRATEGIC PARTNERSHIP

Mexico and China are promoting a Comprehensive Strategic Partnership that gives special attention to political dialogue, to strengthening the institutional framework that regulates the relationship, to expanding economic, social, and cooperation relations, and to foster affinities in different multilateral forums.

The foundations for the current level of cooperation and understanding between Mexico and the People’s Republic of China were built almost half a century ago, with the establishment of diplomatic relations in 1972. These foundations have grown and strengthened in line with the development of both countries and in accordance to their respective participation in the global scene. Throughout this journey, high-level political dialogue has been the relationship’s main engine and is the trigger for specific actions in all sectors.

Ever since he was elected, President Andrés Manuel López Obrador has reiterated the importance of China to Mexican foreign policy. This has been demonstrated by the high-level meetings held in the last two years. In this regard, several visits to China by Mexican secretaries of Foreign Affairs, Economy, Agriculture, and Tourism, the conclusion of new agreements, and the recent meetings of the main bilateral consultation mechanisms stand out. A very important step was the ratification in 2019 of the interest shared by Secretaries of Foreign Affairs Marcelo Ebrard and Wang Yi in keeping the consultation and cooperation mechanisms active, and their willingness to strengthen them. In the last year alone, the bilateral relationship was strengthened with various events: the 4th Mexico-China Forum on Parliamentary Dialogue Meeting that took place in Beijing at the end of 2019; the 2nd China International Import Exhibition in Shanghai, which was attended by numerous companies and state governments; the 7th High Level Business Group Meeting, as well as the agreement of new agri-food protocols, such as those for banana and sorghum. In the midst of the pandemic, this year, numerous events took place, including the 17th Mexico-China Political Consultation Meeting, the 3rd Consultation on Multilateral Issues Meeting, the 8th High Level Working Group Meeting on economic matters (GAN), with sessions in all its subgroups, and the signing of new agreements to boost bilateral trade.

Likewise, since the beginning of the pandemic, collaboration has been confirmed at the highest level thanks to direct communications between presidents Andrés Manuel López Obrador and Xi Jinping, and constant dialogue between secretaries of Foreign Affairs Marcelo Ebrard and Wang Yi. These contacts have been essential to address the urgency of social needs derived from the pandemic, particularly the purchasing—in China—of essential medical supplies for COVID-19 patients in Mexico, and the repatriation of Mexicans who had no commercial flight options to return to our country. The Shanghai-Mexico City airlift has been key for the transfer of Chinese medical equipment and personal protection materials purchased by the Mexican government, and will be equally crucial for the transportation, in due course, of the awaited vaccines.

Also, donations from central and local governments, and of Chinese companies, to the health sector and Mexican entities, have been highly appreciated and are of great use for the protection of people in our country. Virtual exchanges of experiences between health authorities have also been essential to share best Chinese practices to contain COVID-19. Another important result of this collaboration is the joint work of authorities and laboratories of the two countries to develop a potential vaccine against the disease, to carry out phase III clinical trials in Mexico for Chinese formula projects, and if all efforts are successful, the future purchase of the vaccine to guarantee its access to the entire population.

 

These bilateral actions have also achieved a regional projection, as cooperation with China has been extended to all of Latin America and the Caribbean through the coordination of Mexico in the pro tempore Presidency (PPT) of the Community of Latin American and Caribbean States (CELAC). The recently agreed extension of Mexico’s PPT at the head of CELAC for 2021 will allow consolidating the role of an effective bridge that the Mexican government has played between China and Latin America, as it is called to organize the 3rd Ministerial Meeting of the China-CELAC Forum in this period.

In the multilateral sphere, Mexico and China promote affinities on global governance issues in different forums of the United Nations System: the G-20, the Asia-Pacific Economic Cooperation Forum (APEC), the China-CELAC Dialogue, the Forum of Latin America-East Asia Cooperation (FEALAC), and other consultation and coordination bodies. We have an agenda of shared interests on relevant issues such as poverty reduction, the promotion of a multilateral trading system with clear rules, the fight against climate change, and the search for innovative cooperation formulas to promote sustainable and inclusive economic growth.

This year, the support of the Chinese government to the Mexican resolution 74/274 of the United Nations, with which the international community pledged to guarantee equitable access to medicines, vaccines, and medical equipment to combat the COVID-19 pandemic stands out. Both governments have endorsed this wish through their respective participation in the COVAX Initiative.

Mexico’s election for a non-permanent seat on the UN Security Council during the 2021-2022 biennium will bring both countries even closer in defending multilateralism. These actions and the recent reactivation of the Bilateral Consultations on Multilateral Issues allow us to anticipate encouraging scenarios of accentuated cooperation in this area.

 

 

ECONOMIC RELATIONS

The Comprehensive Strategic Partnership has given a great boost to bilateral trade, reciprocal investments, tourism, and technological and scientific cooperation.

 

TRADE

According to Mexican statistics, total trade between Mexico and China exceeded USD$ 95 billion in 2019, corroborating the growing trend of recent years. With the COVID-19 pandemic, which has caused the most serious global crisis in the last hundred years, a substantial drop in exchanges was to be expected, but this has not happened. On the contrary, preliminary figures indicate that total bilateral trade exceeded USD$ 44 billion from January to August of this year, with a slight increase in Mexican exports to China.

The new growth model of the Chinese “dual circulation” economy offers optimal conditions at this time to promote a concerted production and promotion strategy that will lead to increased Mexican sales. The fresh and processed food sector has shown great growth potential. In addition, there are important value chains in the automotive, electronic, chemical, household appliances, construction materials, and metal processing sectors, among others, that are promoted with a focus on long-term market complementation in Mexico and China.

 

CHINESE INVESTMENT IN MEXICO

China is the third investor in Mexico among the countries of the Asia-Pacific region and is already among the top ten worldwide. The accumulated Chinese investment in Mexico amounts to about USD$ 1.5 billion. Between 2013 and 2017 it grew 315.5% and Mexican Association of Industrial Parks records indicate that four out of ten investment proposals in industrial parks this year have come from Chinese companies. Chinese investment is mainly concentrated in the extractive industry, trade, manufacturing industry, construction, and commercial and financial services. There are about two thousand companies with Chinese participation in their capital stock, among which stand out Huawei, Didi, ZTE, Hisense, Alibaba, Lenovo, Minth, Golden Dragon Copper, Foton, SINOPEC, China National Off shore Oil Corporation (CNOOC), Jinko Solar, Envision, JAC and BIAC. In addition, other Chinese companies are present in different infrastructure projects in Mexico.

 

MEXICAN INVESTMENT IN CHINA

Mexican investment in China amounts to over USD$ 200 million, with a significant presence of Bimbo, Gruma, Grupo Kuo (industrial chemicals), ALFA through Nemak and Softek. Other companies work through associations or distribution and marketing operations, like Interceramic (floors and tiles), Tamsa (steel pipes), La Costeña, Grupo Villacero (steel), Metalsa (auto parts) Aeroméxico, Latin Asia (food), Worcester (valves), Seminis (vegetable seeds), Xignux (cables and transformers), IDEAL (infrastructure project analysis), and Femsa Cerveza.

 

TOWARDS NEW PROMOTION STRATEGIES

Chinese investment in Mexico has intensified thanks to the prestige of our country as a world-class production center in manufacturing sectors such as automotive (including electric mobility), aerospace, biomedical, pharmaceutical, household appliances, and telecommunications, among others. Investment options in our country are multiplying under the protection of new trends in the relocation of industries, infrastructure projects underway, and the recent entry into force of the Treaty between Mexico, the United States, and Canada, and the Comprehensive and Progressive Treaty of Trans-Pacific Partnership (CPTPP). The prospects for investment in our country are also strengthened, as is the progress made by the Pacific Alliance and the ongoing modernization of the EU-Mexico Global Agreement. A set of actions and trends, in short, that we must promote and leverage in the immediate future.

 

 

 

In this sense, it is essential to examine how value chains that unite us are integrated, their impact on local development, the promotion of small and medium-sized enterprises, the generation of jobs, access to new sources of technology, human resource training, and the opportunities that these links offer to foster new strategic alliances and to diversify markets and capitals.

In the future, the Mexican export sector will have to continue perfecting its direct promotion and participation in the large promotional events that take place in China, such as the annual Shanghai and Guangzhou fairs, the China Agricultural Wholesale Markets Annual Conference, and the fairs that specialize in food, among the most important. It is also essential to continue taking advantage of interregional meetings, such as those held at the China-Latin America and the Caribbean Business Summit, at the APEC business forums, and at joint promotional events of Pacific Alliance countries, among other high-impact events. For now, the circumstances and modalities of the 3rd China International Export Fair—November 5 to 10, 2020—will set a trend regarding how promotion meetings should be in the near future.

 

INSTITUTIONAL FRAMEWORK TO SUPPORT THE ECONOMIC RELATIONSHIP

The economic relationship is supported by three high-level groups that perform complementary functions among themselves, and liaise with the other chapters of the Binational Commission: a) the High-level Group (GAN), created in 2011 by China’s Ministry of Economy and Ministry of Commerce, whose 8th Meeting was held in July, 2020; b) the High Level Group on Investment Matters (GANI) made up of the Ministry of Finance and Public Credit, and the National Development and Reform Commission of China, from which a Binational Investment Fund has been derived that has supported projects in the energy and telecommunications sectors; c) the High-Level Business Group (GANE), a space for direct communication between business leaders from both countries, which has met regularly on nine occasions, the most recent at the end of 2019. On the other hand, in terms of financial services, in 2016, the first subsidiary of the Industrial and Commercial Bank of China (ICBC) began operations in Mexico, the first Chinese bank with a presence in our country, and in June, 2018, the Bank of China’s subsidiary began operations. Bancomext plays a prominent role in this sector, and so has its representative office at the Mexican Embassy in Beijing.

 

THE IMPORTANCE OF SOCIAL CONTACTS

Social contacts are just as important as economic relations, and are seen in tourism, educational and cultural exchanges, cooperation for development, and the exchange of experiences in matters of public policies aimed at addressing our respective development priorities.

In this sense, the intense cultural agenda of Mexico in China has allowed greater rapprochement and a deeper understanding between both countries. Mexico participates every year in practically all the arts and culture festivals in China, including a range of disciplines: literature, visual arts, music, cinematography, performing arts, and of course, Mexican gastronomy. With this, the good image of our country is spread in the vast Chinese territory, and tourism and Mexican creative and cultural industries are promoted.

 

Teaching our and their languages is another way of bringing our peoples closer together: currently, more than 55 thousand people study Spanish in China, while in Mexico, thousands of Mexican students are taking courses in Chinese culture and language given in five Confucius Institutes.

Regarding academic exchanges, different universities in both countries maintain close ties thanks to institutional mechanisms such as the Mexico-China Excellence Scholarship Bilateral Program, and the Special Programs of the Government of Mexico for Foreigners. Liaison offices of Mexican universities in China, including those of UNAM, the Monterrey Institute of Technology and Higher Education, and the Veracruzana University, are also gaining importance. Joint research programs and permanent tasks in various study centers on Mexico in the main Chinese universities are also noteworthy. According to the National Association of Universities and Institutions of Higher Education, China has remained in recent years as the tenth preferred destination for Mexican academic exchange students worldwide, and the sixth country of origin for international students in Mexico. To maintain this level of exchanges, principals and representatives of the main universities in Mexico and China maintain a continuous dialogue through the Mexico-China Principal Forum, whose third session was held in Mexico City in October, 2019, with widespread participation of executives from both countries.

 

TOURISM

Before the international travel restrictions derived from the pandemic, tourism between Mexico and China reflected a growing interest of both peoples for mutual knowledge between our two great civilizations. This is demonstrated by the 11 weekly flights that until recently linked Mexico and China. Along with numerous additional connections through North America and Europe, these flights led to sustained growth in tourism: in 2018, almost 180,000 Chinese tourists arrived in Mexico, and it is estimated that we received nearly 200,000 Chinese visitors in 2019, which led the Secretary of Tourism to successfully deploy a comprehensive tourism promotion strategy in China at the end of 2019. As regular contacts are resumed under the new normal, we will continue to work with relevant actors in China and in Mexico (airlines, local governments, ministries and secretariats) in order to reestablish routes and create new options for the transfer of passengers and cargo, with the purpose of repositioning tourism, and trade and cultural exchanges.

 

EMERGING CHAPTERS OF PRIORITY ATTENTION

The unprecedented circumstances generated by the health emergency have led to the focus on two sectors that will become more important from now on: cooperation in science and technology, and the exchange of experiences in public policy.

The extraordinary measures implemented by China in the face of an unexpected situation yielded undeniable positive results. Their experience can be used by other countries, Mexico among them, to adopt the best practices in health and sanitary control, economic measures for recovery, social protection policies, technological impulse, and new forms of international cooperation. We have benefited from learning first-hand about the emergency measures applied in China, which allowed that country to resume face-to-face activities quickly and with health safety. We also closely follow public policies aimed at protecting production, encouraging consumption and promoting international trade. Many of these measures have involved the reengineering of processes in productive, financial, labor and fiscal aspects, the modification of rules to attract foreign investment, the establishment of new free trade zones and the rethinking of their international cooperation formulas.

Timely monitoring of all these policies is crucial for Mexico, both because of the impact they have on the global economy and because of the opportunities for cooperation that are on the horizon.

 

IN CONCLUSION

The health crisis, its enormous economic and social repercussions, and its effects on international relations, on top of to the profound geopolitical changes under way, force us to rethink the future and the way in which we interact with our strategic partners. In the case of China, given the radical change in circumstances, we have to start from the solid foundations that we have built in recent decades and aspire, first of all, to recover levels of trade similar to those of the last three years, and to relaunch the different sectoral links.

In the coming years, we will continue to move forward with the Mexico-China Comprehensive Strategic Partnership, acting in five interrelated areas of action: a) consolidating the progress made, especially in the political dialogue and the regulatory framework of the relationship; b) concentrating on chapters with the greatest potential, trade, investment, technology, training, connectivity and social exchanges; c) incorporating new topics, actors and agreements, giving the importance they deserve to local authorities, inter-parliamentary contacts, small and medium-sized entrepreneurs, research centers and specialists in China; d) promoting greater communication and agreement on global and regional issues; and e) exploring emerging scenarios in light of changing national and international circumstances. All of this will lead to collaboration with a long-range and open-minded approach. The roadmap has been drawn and we will have to persist on that path.