Tag Archive China

Many U.S. Companies Moving Manufacturing to Mexico – Known as “Nearshoring” – Amid Rising Risks of China Reliance

March 6, 2024 Comments Off on Many U.S. Companies Moving Manufacturing to Mexico – Known as “Nearshoring” – Amid Rising Risks of China Reliance By The Incorp China Team
China has long been recognized as the manufacturing giant of the global economy. However, in recent years, efforts by global businesses to optimize supply chains and reduce risks have made the "near-shoring" trend increasingly popular. File photo: Sirtravelalot, ShutterStock.com, licensed.
United States outsourcing manufacturing to Mexico was slow as recently as 2019, but as of July 2023 Mexico made up 15 percent of all U.S. imports – granting it new status as this country’s largest trading partner – with China coming in second at 14.6 percent.. File photo: Sirtravelalot, Shutter Stock, licensed.

PALM BEACH, FL – While China has been the dominant force in global manufacturing for decades now, in recent years a phenomenon known as “nearshoring” – the practice of transferring a business operation to a nearby country, especially in preference to a more distant one – has taken hold of companies in the United States, with many weighing the risks of relying solely on the Asian juggernaut amid numerous concerns, including cost, reliability, and rising U.S./Chinese economic tensions.

As a result of these factors, many American companies are turning their attention to their immediate neighbor to the south – Mexico – for their manufacturing needs, leading to the country as of 2023 surpassing China as the U.S.’s leading trade partner.

In Q3 2023, audits and inspections in Mexico on the part of U.S. buyers showed over a 17 percent degree of growth year-over-year. This has been cultivated by U.S. companies desiring increased supply chain reliability and flexibility resulting in shorter lead times and more affordable transportation costs, in addition to establishing a cooperative economic relationship with one of America’s closest neighbors.

This greater reliance on Mexico came at the tail end of the COVID-19 pandemic; the United States outsourcing manufacturing to Mexico was slow as recently as 2019, but as of July 2023 Mexico made up 15 percent of all U.S. imports – granting it new status as this country’s largest trading partner – with China coming in second at 14.6 percent.

Bear in mind that American companies are not abandoning Chinese manufacturing, far from it; it’s just that many are recognizing the need to add additional options to their existing supply chain as more and more businesses and organizations develop international influence or start operating on an international scale.

For an example of the genesis of this sudden and rapid growth, in February of 2022 Walmart chose a family-run apparel business in Mexico called Preslow over their usual Chinese source to purchase a $1 million order of company uniforms. The reasons made sense- the pandemic had caused the costs of international shipping to skyrocket, and supply chain issues had resulted in ports being jam-packed with incoming transport vessels, resulting in months-long fulfillment delays.

The logic of relying on one country halfway around the world for important goods was beginning to be questioned.

Mexico has been gearing up for the rise of nearshoring; since 2019, the country has grown its industrial space by 30 percent, but is still in the process of assessing and addressing some of their manufacturing weaknesses as well, such as security, power availability, and infrastructure.

U.S. businesses have been taking note of the numerous advantages to dealing with their neighbor to the south for their needs, including the country’s exceedingly close proximity, low labor costs translating to reduced pricing, a proven and reliable industrial base, and – perhaps the biggest reason of all – the fact that all products manufactured in Mexico and imported to the U.S. that are compliant with the United States-Mexico-Canada Agreement (USMCA) are assessed zero tariffs.

Other reasons for the growing popularity of nearshoring have been due to deteriorating economic relations between the U.S. and China; in 2018, the Trump Administration – claiming that Beijing’s aggressive trade practices were a violation of global trade rules – began imposing harsh tariffs on Chinese imports, a move that President Joe Biden continued to support after taking office in 2021.

Since then, the Biden Administration has encouraged American companies to engage in manufacturing with allied countries – called friendshoring – to bring back their manufacturing to the United States – known as reshoring – or, finally, to seek suppliers closer to the country via nearshoring.

In the near future, American companies are expected to continue to diversify their sourcing options, while nonetheless still keeping China as a major partner in a large number of their manufacturing ventures. It will be interesting to see how the industry will reshape itself in the years to come as globalization continues to grow and evolve.

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The Surge in Business Between Latin America and China- And Why It Matters

July 18, 2023 Comments Off on The Surge in Business Between Latin America and China- And Why It Matters By Bethany Newcomb

Initiatives implemented by China have boosted China-Latin America trade relations greatly over the past decade. And the forecast for the bilateral future in trade and development is looking bright.

Cargo ship arriving in a Chinese port. Photo courtesy of Xinhua, Chinadaily.com, https://global.chinadaily.com.cn/a/202003/26/WS5e7c48c0a310128217282377.html

Over the past two decades, China and Latin America have been seeing a steady increase in trade and development. Between 2000 and 2020, China-LatAm trade grew 26-fold from $12 billion to $315 billion. On the contrary, the United States’ domination as the largest trade partner with Latin America has taken the opposite route, steadily declining and slowly losing its ongoing trade war with China. How did this happen? Several reasons- the root of which begins with China’s geopolitical agenda.

What are China’s Origins and Interests in the Region?

China’s interests arguably began with diplomatic intentions, following the “South-South Cooperation” and 2001 Latin American tour and 2013 presidency of Chinese President Xi Jinping. The cooperation aimed to create a framework focusing on aid, investment, and trade, using “soft power” to help establish Beijing as a “political goodwill” and eligible political partner over the United States. Why Latin America? The great 2008 financial crisis was continuing to dampen the Americas region. President Jinping successfully signed on several diplomatic partnerships with many Latin American countries, finding allies in Argentina, Brazil, Chile, Ecuador, Mexico, Peru, and Venezuela. Soon after, China became a major source of foreign direct investment and lending in a variety of sectors: energy, infrastructure, space, military, food and agriculture, medicine, and technology. This began the $1 trillion transcontinental 2013 Belt and Road Initiative (BRI).

With the creation of the BRI, China invested heavily in the Latin American space sect, also going on to form a defense strategy with Latin America to gain stronger military ties, bolstering the trade of weapons, intellect, transportation, and other equipment. Because China’s independent financial growth skyrocketed during this period (2000-present) as well, that contributed to even more commodities flooding into Latin America. China has investments in energy and raw materials, such as building refineries and processing plants, predominantly for mining lithium. Renewable energy projects such as solar and wind facilities contribute to both energy and infrastructure efforts, in addition to construction projects such as building highways and airports.

China-Latin American Importance During COVID-19

A significant sect of the BRI was China’s contribution to Latin America’s health sect during the Covid-19 pandemic. This sect of contribution reinforced Beijing’s diplomatic and alliance efforts, distributing an extremely large array of medical equipment, billions in loans, and localized vaccine production facilities. Prior to its enactment, Latin America turned to China for medical assistance in 2018. This organized the meeting of the Community of Latin American and Caribbean States (CELAC)-China Forum in Chile from 2019-2021, coincidentally the same time Covid-19 emerged. As of June 2022, a dozen Latin American countries signed vaccine contracts with Beijing, some even including technology transfers and research cooperation with Sinovac, Chinese vaccine developer. More than 400 million Covid-19 vaccine doses had been donated to Latin America, making up about 70% of vaccine coverage in Chile, Argentina, Brazil, Mexico, and Peru.

COVID-19 health supplies from China arriving in Argentina. Photo courtesy of Health Minister, Ginés González García, Facebook.

China-Latin America Business Will Continue to be Successful- Here’s Why

According to the current trajectory projected by the World Economic Forum, China-LatAm trade is expected to exceed $700 billion by 2035, and could total to 25% of Latin America’s total trade (the U.S. currently holds a declining 28% total trade contribution). Note that these numbers are discrepant among the different Latin American-Caribbean countries due to varying political affiliations, however countries such as Brazil, Chile, and Peru may have 40% of their total trade made up by China. Contributing factors to bilateral growth are China’s drive to beat the United States in the trade war, rapid innovation, 4IR technologies, and China’s expansion to other parts of the world which creates a resourceful connection for its Latin American diplomatic allies. There are several other significant benefits doing business under the umbrella of the China-LatAm bilateral force:

  1. Market Access: Latin America gains access to one of the largest consumer markets in the world. China’s population and other allies offers immense potential for Latin American businesses to expand their reach and tap into new customer segments.
  2. Trade Opportunities: China’s robust manufacturing sector provides Latin American countries with opportunities for exporting raw materials, commodities, and agricultural products. This trade relationship can foster economic growth and diversify export markets for Latin American nations.
  3. Infrastructure Development: Chinese investments in Latin America’s infrastructure projects can fuel development and improve connectivity within the region. This can enhance transportation networks, power generation, telecommunications, and other critical areas, boosting economic productivity.
  4. Technology and Innovation: Trade and Development with China can facilitate knowledge exchange, technology transfer, and innovation. Chinese expertise in areas like telecommunications, e-commerce, renewable energy, and digital technologies can contribute to Latin America’s technological advancements and competitiveness.
  5. Investment and Financing: China’s financial resources and investment capabilities can provide Latin American countries with access to capital for infrastructure projects, industrial development, and economic diversification. Chinese investments can contribute to job creation and economic stability in the region.
  6. Cultural Exchange: Business partnerships between Latin America and China promote cultural understanding, exchange, and human-to-human connections. Such interactions can foster cross-cultural learning, strengthen diplomatic ties, and create a platform for future collaborations in various sectors.

However, it is essential for both regions to carefully consider potential challenges, such as differing business practices, cultural differences, and ensuring equitable partnerships that benefit all stakeholders involved. Additionally, Agriculture and Mining are among the industries most affected by China’s growth, so being aware of which industries are being shifted around will give Latin American businesses an advantageous scope of their competitive and financial outlook in terms of demand and supply.

Resources

Ellis, Dr. R. Evan. “Viewpoint Why Chinas Advance in Latin America Matters.” Www.nationaldefensemagazine.org, 27 Jan. 2021, www.nationaldefensemagazine.org/articles/2021/1/27/viewpoint-why-chinas-advance-in-latin-america-matters.

Kimer, James. “China-LAC Trade: Four Scenarios in 2035.” Atlantic Council, 12 May 2021, www.atlanticcouncil.org/in-depth-research-reports/china-lac-trade-four-scenarios-in-2035/#China-LAC-Today. Accessed 18 July 2023.

Nugent, Ciara, and Charlie Campbell. “The U.S. And China Are Battling for Influence in Latin America, and the Pandemic Has Raised the Stakes.” Time Magazine, 20 Dec. 2020, time.com/5936037/us-china-latin-america-influence/.

Roy, Diana. “China’s Growing Influence in Latin America.” Council on Foreign Relations, 15 June 2023, www.cfr.org/backgrounder/china-influence-latin-america-argentina-brazil-venezuela-security-energy-bri#chapter-title-0-4.

Sanborn, Cynthia. Latin America and China in Times of COVID-19. Oct. 2020.

Zhang, Pepe, and Tatiana Lacerda Prazeres. “China’s Trade with Latin America Is Bound to Keep Growing. Here’s Why That Matters.” World Economic Forum, 17 June 2021, www.weforum.org/agenda/2021/06/china-trade-latin-america-caribbean/.

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Investment Provinces: a Quick Look at China’s Richest Regions

April 27, 2021 Comments Off on Investment Provinces: a Quick Look at China’s Richest Regions By Robert Fisch

It is quite well-known that China had made stupendous economic growth in the last 30 years. Today, we compiled a list of the richest provinces where the growth most rapidly occurred.

Guangdong  

The three main cities are: Jiangmen City, Kaiping City, and Foshan City. The GDP (Gross  Domestic Product) is the total of 12.5% of the entire nation. This province is considered one of  the most notable provinces in China, giving it dominant economic and financial strength.  Being China’s most populous province with over 100 million residents, this province is also known for benefiting greatly from the “reform and opening” policies such as the Open Door  Policy.  

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China’s Digital Market: How it Combats the Economic Consequences of the Coronavirus

May 5, 2020 Comments Off on China’s Digital Market: How it Combats the Economic Consequences of the Coronavirus By The Incorp China Team

Even before the surge of Coronavirus cases and the world going into lock down, the digital market in China has been on the rise, and more dynamically than most nations around the world. Such systematic progression is rooted in the country’s core business model as well as the business environment created by China’s rapid growth.

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Be Prepared: Five Important First Steps for Setting up your Business in China

July 3, 2018 Comments Off on Be Prepared: Five Important First Steps for Setting up your Business in China By Obed Diaz

Compared to the fast-paced explicit processes which dominate Western business, starting a company in China can be a headache.  Combine extensive legal work with a social system opposite of your own and even the most experienced businessmen and women are in for a challenge. 

However, establishing a presence in China continues to be a profitable move for entities in every business sector. With endless resources at your disposal, how to begin gets confusing.  We’ve stripped away all the particulars and provided you with a basic idea.

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How to save money and time through effective negotiations.

February 16, 2018 Comments Off on How to save money and time through effective negotiations. By The Incorp China Team
China, Shenzhen, WOFE, business, bank, money

Without any discussion, money and time are the most valued resource for business. For western companies, traveling to china can be an investment due to the utilization of this two resources. Think about the costs of traveling, lodge, transportation, and the time spent on meetings or any process like registration and permits application. This case is about how one of our clients has saved through our effective negotiations.

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China’s 3-in-1 license

January 11, 2018 Comments Off on China’s 3-in-1 license By The Incorp China Team
Shenzhen, change, China, region, province, legislation, work, affect, business, license, adapt, complicated, careful, operating, three, one, government, Party, certificate, business model, help, useful, information, detail, fapiao, law, change, new

What is the 3-in-1 license?

The 3-in-1 license is a new format of the business license currently in existence. By the end of the calendar year 2017, all original business licenses must be updated in order for the company to be able to continue operating. The updated business license will merge three company certificates – the firms’s business license, tax certificate and organization code – that had to be issued separately so far. As a result, your company will officially run under a single social credit code.

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How to Conquer Chinese Manufacturing

January 7, 2018 Comments Off on How to Conquer Chinese Manufacturing By The Incorp China Team
chinese manufacturing,China, Asia, company, manufacturing, conquer, master, manage, organization, production, product, cargo, manufacturing, factory, quality, control, barrier, entry, work, entity, client, delivery, order, customer, timely, quick, on time

Western companies face every day the struggles of having a split operation between Head Quarters and a Chinese manufacturing division. Complying with due dates, design specifications, proper storage, and shipping can become a nightmare. Obvious questions just rise when dealing with those situations.  How do you guarantee quality and oversee the process cheaper than by hiring even more staff? How to effectively communicate with the production team? How to save the operation without sacrificing the budget?

Through many years, Incorp China had helped clients to overcome this struggle and here are the three main challenges you need to overcome when trying to conquer Chinese manufacturing.

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Why You Need a Flexible Support System in China

August 15, 2017 Comments Off on Why You Need a Flexible Support System in China By The Incorp China Team
support, airport, China, WOFE, open a business in China, china business support, china business consulting

The problem

We always look to  provide the best support to our clients, but due its size, China can be an overwhelming country , so we understand when our clients are hindered to come directly to our office in Shenzhen. Just recently, one of our clients, a paper products manufacturer, was looking into moving part of his manufacturing process to the South West region of China. Since the team of three was on a strict time schedule they were not able to come to Shenzhen personally in order to meet with Incorp China’s team to discuss the bureaucracy behind such a move.

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Opening Up a Bank Account Under Tightened Restrictions – What You Need to Know

July 21, 2017 Comments Off on Opening Up a Bank Account Under Tightened Restrictions – What You Need to Know By The Incorp China Team
Opening Up a Bank Account in China, credit card, Opening Up a Bank Account Under Tightened Restrictions - What You Need to Know

Why opening a bank account in China is more difficult today

It is no secret that the recent crackdown on money laundering has left foreigners struggling to open a bank account in China. As a result, it has become even more beneficial for foreigners, seeking to move or extend their business to China, to consult an agent on the ground. The reason why there are so many China consultancies on the market is because it’ is quite challenging as well as time and labor intensive to get a company approved. Only a few of these China consultants are as committed as Incorp China, connecting with the government bureaus and banks, forming friendships, and therefore getting our clients the service they deserve.

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