China has dramatically increased its foreign investment in Mexico in the private and government sectors over the past decade, raising some concerns as experts warn there is financial and political leverage for Beijing as US-Mexico relations falter.

In 2021, China’s foreign direct investment (FDI) in Mexico reached an all-time high despite restrictions Washington slapped on Beijing’s exports when the trade war began.

But Eric Farnsworth, vice president of the Society of the Americas and the Council of the Americas, told Fox News Digital that “China is increasingly seeing opportunities in Mexico and investments are increasing.”

The economic development and trade expert explained that the surge in Chinese investment comes down to two main contributing factors: Beijing’s attempts to circumvent Washington’s sanctions and deteriorating US-Mexico relations.

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“It’s convenient to try to circumvent the sanctions … by going to Mexico and then producing in Mexico and then trying to get into the U.S. market,” Farnsworth said.

Despite the ongoing trade war, the US market remains China’s largest single-nation exporter, second only to the 11-member Association of Southeast Asian Nations (ASEAN), and the European Union, which is made up of 27 nations.

But Chinese companies eager not to lose any American consumerism have increasingly set up shop south of the US border in hopes of circumventing US trade restrictions and slapping a ‘Made in Mexico’ sticker to their products.

The “nearshoring” strategy in Mexico is not new, and nations such as Japan have been producing basic goods such as automobiles from the southern neighbor of the United States for decades due to its immediate access to the States and its more affordable production rates. .

When looking at China’s FDI in Mexico, though, it’s not just private entities looking to play in the moment, Farnsworth said.

“China’s relationship with Mexico is not very strong, but the more the relationship between Mexico and the United States deteriorates … China sees an opportunity,” he said.

The People’s Republic of China has also made investments in Mexico, similar to initiatives it has launched in other parts of Latin America, particularly in telecommunications systems, digital infrastructure, energy and natural resources.

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Dubbed “white gold” for its growing global demand due to its use in everything from toasters to electric vehicles, lithium has become a commodity and Mexico is one of the 10 richest nations in lithium Of the world.

But Mexican President Andrés Manuel López Obrador has pushed his nation to nationalize lithium, which has left more questions than answers when it comes to investing in and exporting the natural resource.

As of this week, both houses of Mexico’s government have approved a bill that would give a state agency complete control over its lithium mining and extraction. No such agency exists yet in Mexico, and it’s unclear whether the government has the technology to extract its lithium, which is largely trapped in heavy clay soils.

Only one lithium mine in Mexico, operated by a Chinese company, is even close to being able to extract the main natural resource, and it is not yet clear whether the Mexican government intends to seize that mine, he said. report Reuters this week.

A security expert on Latin America and the executive director of the Center for a Free and Secure Society, Joseph Humire, said that apart from hindering China’s lithium ambitions in Mexico, he believes nationalizing the resource could open the lithium market to corruption and even strengthen Beijing’s. to arrive.

“The reason they want to nationalize all these things is they want to have state control of them, so they can facilitate a state-to-state contract with China,” Humire said.

Humire explained that the state-to-state contracting process is “much easier” than maintaining open bidding processes through a private company with foreign capital overseas.

“The United States competes very well with foreign capital. We have some of the largest companies in the world and large industries, including the extractive industry,” he continued. “But you limit that competition when you nationalize it.”

Humire said state-to-state contracts are often based on “broader relationships” one nation shares with another, and while the US has a long-standing trade partnership, China is able to offer incentives that private American companies cannot.

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China has long developed a reputation for overpaying for foreign assets in which it is interested in investing, a strategy that not only pushes private companies that depend on capital returns and shareholder interests out of the competition, but which also buys influence and foreign influence.

“Why are they [Chinese companies] paying these [prices]? Because they are run by the government, which is interested in these assets for strategic reasons,” Farnsworth said.

The development expert explained that China’s various investment interests, both in the private sector and in the government, are essentially “one and the same”.

“It’s almost universally run by the government,” he said. “Strategic investment decisions, where to go, how much to spend, what are the benefits for China, etc. are driven by the central government.”

While China has increased its FDI, lending and trade with Mexico in recent years, it is also doing so cautiously, and the United States remains Mexico’s top investment partner, said Evan Ellis, a professor of research in Latin American Studies at the Strategic Studies Institute of the US Army War College.

According to Mexico’s Ministry of Economy, China accounted for just 8% of its global FDI, bringing in less than $1 billion in 2021. While the US accounted for nearly 43% of all its foreign investments with $15 billion in FDI that year.

“China has moved relatively cautiously toward Mexico, recognizing historically that it is a conservative country, or at least used to be conservative, that is very close to the United States,” he said. “And yet China recognizes Mexico’s strategic value.”

“Mexico is, in many ways, a sort of strategic buffer between US investment and influence and China and the rest of the Americas,” he added.

Ellis, who is also a senior fellow at the Center for Strategic and International Studies, said China’s interest in Mexico remains a concern.

“The danger is not that Mexico will do business with China,” he said. “The danger is an economically weakened, politically more fragile, less transparent Mexico [and with] more corrupt institutions, doing business with China in a way that allows China to move forward in a predatory way and influence the political classes.”

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