The cheap labor that propelled China from economic stagnation to the precipice of a high-income country in 2021 may soon be no more. The rapid economic growth over the past couple of decades has – happily – led to a steady increase in wages and improved living standards. However, this has placed increasing pressure on manufacturers who have for a long time relied on the low operational costs in China, leading some to consider relocating operations other countries.
The concept of “reshoring” took off in China after the instigation of the China-US trade war in 2018, when tariffs on billions of dollars’ worth of Chinese goods led some investors to reconsider the viability of China as a destination for manufacturing and other operations.
More recently, stringent COVID-19 control measures imposed in China at a time when most other countries are opening up has reignited discussion of reshoring, as companies struggle to keep production going and are reconsidering their future in the country.
Some analysts have argued that one of the best options for companies operating in the North and South American markets looking to diversify their supply chains is reshoring to Mexico, pointing to its lower operational costs and proximity to the U.S.
In this article, we discuss how prevalent the phenomenon of reshoring out of China is and whether Mexico has significant advantages over China by looking at key metrics, such as operating costs, market size, trade, and diplomatic relations.
There are no concrete numbers on the number of companies that have relocated factories or production facilities from China to Mexico, and incidents of this occurring therefore at most amount to anecdotal evidence.
Source: El Financiero