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Baby, you can drive my (Chinese) car…

17 June 2007

This is the second story I’ve seen in the last few days about an “emerging economy” investing in Mexico. The Indians have been coming in under the radar, investing in Mexico for two reasons. Their businesses grew tremendously simply because there are a lot of Indians, but without a good educational system or social infrastructure, they’re running up a limited middle class market. Mexico has a well-educated workforce, a strong middle-class and… best of all for the Indians… is a NAFTA partner, with access to the very wealthy U.S. and Canadian markets.

The Chinese are in a bind. Other than cheap labor and a huge military-industrial complex, they don’t have much to offer. I half-suspect that the Chinese-U.S. Chamber of Commerce’s selection of Prescott Bush II (brother of former U.S. Ambassador to China) George H.W. Bush and the Bush family’s long ties to China (Barbara Bush’s family fortune came from the 19th century opium trade) is partially responsible for China’s present good relations with the U.S.

That will change. The Chinese haven’t survived for 3000 years by thinking short-range. Their dependence on a military buildup can’t go on forever, no more than it could in the Soviet Union (remember them?) or in the United States. The Chinese people themselves may get fed up with the present system (and there’s plenty of signs buried in the media that China is not as stable a country as we think).

Mexico has also been around for the last 3000 years, mostly by adapting to new situations. And, for the last 150 years, that meant doing business with the United States. That’s not going to change any time soon, though the close U.S.-China ties (depending on a captive labor market with no rights) will. So… being above all things, not stupid, this is a no-brainer.

Tijuana is probably not where I’d think of putting up a new plant, but then, Hu Jintao lived in Tijuana for a couple of years (I’ll try and find the source for that, but it’s true… he was studying Tijuana’s economic system to figure out what do about Chinese cities bordering wealthy Hong Kong).

TIJUANA, Mexico: A Chinese automaker will invest $300 million in an auto plant it is setting up in Mexico near the US border, giving the Asian country a beachhead in North American vehicle production.

China’s Zhongxing Automobile will start churning out sport utility vehicles and pickups in 2009 at the assembly plant in Tijuana, the company’s US partner in the venture, Chamco Auto, said late on Thursday.

Zhongxing plans to export 25 per cent of the Tijuana-assembled vehicles to the United States, building off another venture to export 50,000 vehicles duty-free to Mexico.

Those models are expected to hit Mexican showrooms this year. The Tijuana plant will have a capacity of 150,000 vehicles per year, Chamco said.

On Tuesday, Chamco Auto said it had reached a deal to import the trucks and establish a plant, but did not give figures.

Assembling the Zhongxing vehicles in Tijuana will make them Mexican under North American free trade rules, so they can be exported to the United States duty free, the company says.

They will be similar to popular models made by US and international automakers and will be cheaper, Chamco said.

“We want to bring this type of project to Mexico because we see a real future in them,” Oscar Margain, head of Chamco’s Mexican operations, told Reuters.

China’s domestic car industry is heating up and is looking to break into the lucrative North American market.

Mexico is already a major auto manufacturer, with Nissan Motor Co Ltd, Ford Motor Co, Volkswagen AG and other big names exporting a combined 1.5 million cars and trucks to mostly US consumers last year.

Something else worth noting. Mexican workers (even if they’re working for the Chinese) are going to be in Mexico, not the U.S. Yeah, the profits will still be going to a military threat to the U.S., but given that China has been “stealing” Mexican jobs for years (WalMart destroyed a lot of Mexican manufacturing, and bears some of the responsiblity for the huge “illegal alien problem”), this is a half-way step to resolving the contradiction between NAFTA (favoring a democratic friendly neighbor) and giving “most favored nation” trading concessions to an anti-democratic, off-shore military threat.

Cheap labor ain’t everything.

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