Why is Baja California a natural receptor to investment from China?

Why Tijuana?

As the third largest investor in the world The People's Republic of China’s foreign investment covers numerous economic segments, from those aimed at high technology, to those associated with infrastructure, extraction, manufacturing, etc. In addition, some of the Chinese companies have managed to rival multinationals in developed economies and compete successfully in specific global value chains (GVCs), so the arrival of Chinese companies to Mexico potentially means a learning opportunity about new structures of competition and successful business organization. Baja California, the northwestern state of Mexico, which borders with California USA is well known for historically being the main platform in Mexico for Asian Investment, reasons such as the proximity to the USA, the Port System, sharing the pacific ocean with Asian Countries and a culturally adept population able to integrate different cultures and particularly in tune with Asian communities has made it the perfect place for Asian groups to do business in, however, until today Baja California only represents 0.1 percent of the total investments received during the 2000-2018 period, so that Chinese investment has enormous potential in quantitative and qualitative terms in Baja California. Now that there are two direct flights from China to Tijuana, one from Beijing and one from Shanghai, we have started noticing an important influx of Chinese investors visiting the region, companies such as FOXCON and HISENSE have already established manufacturing operations here and we see this as a successful trend.

In Latin America and the Caribbean (LAC), China invests mainly in items associated with the extraction of raw materials, however ultil today in Mexico the Chinese investment that has arrived has been concentrated in sectors such as electronics, telecommunications, auto parts and automotive. These companies seek to penetrate the Mexican market, but also reach North, Central and South American markets from our country, due to their geographical location, as well as the trade agreements to which Mexico is a party with 46 countries. Therefore, Baja California offers a productive and cooperative hub in knowledge and technology in cooperation with China, focused on building capacities in strategic sectors and of interest to both. On these issues, there are a number of sectors considered strategic for China, for which the Asian country has the Made in China 2025 plan, which seeks to consolidate China's technological and value-added capabilities in sectors such as robotics, green energy, aerospace , among others in the year 2025. The next government of Baja California, could well choose from affinities or interests sectors from this plan, and thereby propose specific cooperation with governments, companies, universities and research centers in the region.

For its part, the direction of China's public sector in the outflow of investments from the Asian country is of the greatest relevance to its companies (public and private), because China has established frameworks and support for the international expansion of it's companies. In this regard, Baja California has a solid advantage, as the only entity in the country with a Chinese Consulate based in Tijuana, the economic capital of Baja California. In addition to this, the entity has social elements that could contribute to attracting investments, such as the oldest Chinese community in the country, as well as significant flows of visitors and Chinese tourists to the region. However, these links have much potential to be enhanced, because the opportunities for cooperation with China on issues such as environmental, economy, culture, politics, tourism, and so on still remain almost untouched, this is a huge opportunity.

For Chinese entrepreneurs or investors that wish to explore and penetrate the markets within "The Americas" meaning north, central, and south America, China has been developing sources of financing for specific projects, as the country has a group of development banks worldwide, which finance international cooperation projects. The most important seems to be the Belt and Road Initiative, a mechanism of the Chinese government that seeks connectivity through infrastructure between China, Asia, Europe, Africa, Latin America and the Caribbean. This strategy has forms of financing particularly facilitating technological cooperation. There are currently more than 100 countries that have signed a memorandum of understanding with China in this regard, of which 17 are from LAC. In this area, Baja California has a favorable geography to adapt to this strategy, because of the need for a better seaport focused on Asia, as well as high-speed roads and trains with capacities for the growth plans of the Fourth Transformation (The new president Andres Manuel Lopez Obrador's initiative to transform Mexico), the cooperation with China in infrastructure of Baja California could be an element to create better conditions for local development and a trade and manufacturing strategy between Mexico and China.

And finally, to add even more relevance to this new dynamic, the commercial and technological tensions between China and the United States seem not to end, decisions and threats have shaken up the international community not only in relation to China but with Mexico as well. It all points to where the stage is set, meaning that both China and Mexico can leverage on the current situation so that more Chinese companies that seek to penetrate the US market can beinstalled in Baja California, making optimum use of their territorial advantages, both competitive and comparative. However, the above requires a timely effort in the specialization between both countries including all sectors (government, companies, academia, communities, etc.), because it is the second largest economy in the world which is competing in technology and commerce with the United States, so it's necessary to consider this as part of a strategic agenda, within the framework of the geopolitical triangle (China-Mexico-United States), where the ambition for growth and diversification of Baja California is framed. In addition, we must consider the recent Chinese plans that seek to increase domestic consumption, as well as an increase in strategic foreign direct investment that can benefit China.

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