The Xinhua News Agency recently reported on a meeting in April between Chinese Vice President Xi Jinping and Mexican Foreign Minister Patricia Espinosa in Beijing to reinforce the two countries’ strategic partnership and celebrate the 40th anniversary of diplomatic ties between the two nations.  As part of the official celebration of diplomatic ties, Mexico and China signed a cooperation agreement on April 6, 2012 during the fifth meeting of the two nations’ Permanent Binational Committee that promised increased trade between them.  The call increased cooperation and trade between China and Mexico is an effort to improve relations that have had periods of tension as both countries have competed for the U.S. market.  In light of the significance of the U.S. to their relations, it is worth taking a brief look at their recent trade history to understand what it bodes for their future relations.

China is Mexico’s second largest trading partner behind the U.S., while Mexico is China’s No. 2 trade partner in Latin America behind Brazil, which ranks 9th among China’s trade partners.  The most significant trading partner for both China and Mexico is clearly the United States.  Nevertheless, China and Mexico have seen increasing trade between each other in recent years.  The last decade saw Sino-Mexican trade increase from $3 billion in 2000 to almost $35 billion in 2011, according to official Chinese figures.

Though there has been growing trade between China and Mexico since they forged diplomatic ties 40 years ago, there remains a large trade deficit between them, as there is between China and most countries, including the U.S.  For example, China’s exports to Mexico in 2011 were about $24 billion, while imports from Mexico were about $9.4 billion; China’s exports to the U.S. in 2011 were about $400 billion, while imports from the U.S. were about $104 billion.  While both the U.S. and Mexico seek to balance the trade deficit, Mexico has had the added pressure of competing with China for the U.S. market and has complained in recent years about China dumping cheap goods into the Mexican market.  The April 6 agreement between China and Mexico, which promised to boost cooperation between various industries like biotechnology, traditional medicine, and television, and authorized additional exports of pork from Mexico, signals efforts by China to appease any tension with Mexico, address the trade deficit, and create a strategic partnership considering their relation to the U.S.

Reinforcing the cooperation agreement, Reuters reported on April 20, 2012, that Mexico reached an agreement with China aimed at promoting a fairer balance of trade and announcing business deals worth $560 million.  “This new relationship looks to answer the imbalance that affects Mexico and establish a basis for more balanced and sustainable trade in the long term,” the Mexican Foreign Ministry said.  Among the terms of the April 20 agreement, China agreed to stop certain unfair trade practices relating to Mexico’s complaint about flooding it with cheap imports.

These recent agreements signal that China is making efforts to address the trade deficit with Mexico and strengthen relations with a trade partner who is key to China’s presence in North America.  Additionally, it is worth noting that the rhetoric from the current Mexican presidential campaigns signal changes to come in the near future for Mexico’s state-owned oil monopoly, PEMEX.  If the prospects of opening up Mexico to future foreign investment in oil are real, then China’s relation with Mexico is evidently part of a larger energy strategy.