By: Aidan Carney
Over the last few decades, the People’s Republic of China has reshaped the dynamics of the global economy. China has leveraged its competitive manufacturing capabilities and highly populated labor force to become a global powerhouse in exports, particularly in clothing, electronics, and machinery. This explosive growth has not only caused China’s GDP to soar, but also positioned China as a major player in international supply chains as the world’s largest exporter. As a result, China’s trade relationships have expanded, influencing markets worldwide and prompting shifts in economic policies among both developing and developed nations. Further, in recent times, China has considered expanding their world trade stronghold by developing economic relationships with other nations. These expansions have been both successful and unsuccessful.
Myanmar (formerly known as “Burma”) is a Southeast Asian country that borders the southwest of mainland China for over a thousand miles. Situated east of the Bay of Bengal and north of the Andaman Sea (in addition to bordering Bangladesh, India, Laos, and Thailand), Myanmar holds many sought-after ports and distribution sites.
Led by President Xi Jinping and other government officials based in Beijing, China has developed an economic relationship with Myanmar. China has invested millions of dollars to establish a trade route that spans from Kunming, China to several cities in Myanmar, including Kyaukpyu, Mandalay, Muse (a city situated along the China-Myanmar border), and Yangon (Myanmar’s most populated city). However, the expectations of economic success resulting from this trade expansion have not matured.
Since 2021, Myanmar has been in a civil war between pro-democracy forces and the military junta. In response, China has attempted to work with both sides and facilitated a ceasefire. However, the ceasefire eventually fell apart and military exercises have unfolded, including conflicts along the China-Myanmar border. These exercises have stalled Chinese efforts to expand its trade routes, resulting in losses to Chinese companies seeking to transport goods through Myanmar. Although China’s development hopes in its relationship with neighboring Myanmar have not yet actualized, China is experiencing economic success in another country.
The world’s largest importer of goods is the United States of America. In 2023, the United States had an estimated goods import value of $3,832,000,000,000. This figure is over $700 Billion more than the world’s second largest importer of goods: China at an estimated goods import value of $3,125,000,000,000 in 2023. Consequently, many manufacturing companies want to establish trade relations with the United States and capitalize on the vast amount of funds that America expends on imports. However, due to certain geopolitical situations, establishing economic relationships directly with the United States is not the best path. Rather, it may benefit a country with expansive exporting capacities to cultivate relationships with countries that are geographically accessible to the United States. Countries located in the eastern hemisphere have looked to Latin American and Caribbean nations as potential trade partners. But no country is more sought after than Mexico.
Mexico, situated along the southern border of the United States, provides valuable trade routes into the United States. Further, several of the most populated cities in Mexico are located on the United States-Mexico border. These cities include Tijuana, Baja California (the second most populated city in Mexico), which is located less than twenty miles from downtown San Diego, California (the eighth most populated city in the United States), and Ciudad Juárez, Chihuahua (the sixth most populated city in Mexico), which is located less than ten miles from downtown El Paso, Texas (the twenty-second most populated city in the United States). Apart from its proximity to the United States, Mexico has free trade agreements with the United States under the United States-Mexico-Canada Agreement. This agreement between the three countries lowers trade costs. Recognizing this geographical proximity and the benefits of free trade agreements, many Chinese companies are attempting to capitalize on this trade opportunity with Mexico.
Several Chinese manufacturing companies have relocated production facilities to Mexico. These companies are transporting raw materials and components (mainly in shipping containers) from China to Mexico. The raw materials and components are then manufactured into fully assembled goods. When these goods are fully assembled, they are then transported from Mexico into the United States. This increase in transporting unfinished goods from China to Mexico is relatively recent, however. In 2022, the annual growth in container shipping between China and Mexico was 3.5%. During the following year, in 2023, the annual growth in container shipping between these two nations surged to a 34.8% increase.
Relocating production facilities from China to Mexico also makes sense for Chinese companies due to political proposals in the United States. Former President Donald Trump has mentioned imposing a sixty percent or higher tariff on Chinese goods if he were to regain the Oval Office in the 2024 election. Although Mexico has recently established a temporary import tariff ranging from five to fifty percent depending on the good, these rates would benefit Chinese companies exporting goods to Mexico rather than exporting goods to the United States if the proposed tariffs were accepted. For the reasons stated above, and for several other reasons, it is likely that as time progresses, the number of Chinese companies establishing trade relationships and production facilities in Mexico will grow.
China has expended a colossal amount of funds to cement itself as the world’s leading exporter. While some of the expenditures have proved to be a failure, others have shown immeasurably great potential. Apart from Mexico, China is developing trade relations with countries in Africa, the Middle East, and South America. Although China is already a formidable force in the global economy, notwithstanding the setbacks endured in countries like Myanmar, the world’s largest exporter will likely grow its international supply chain stronghold by continuing to grow and foster relationships with countries as they have done in Mexico.
