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This year is coming to a close. So what's new in economic news? Well, China's US$8,480 nominal per-capita GDP has moved beyond Mexico's US$7,993 (see IMF citation below). This is interesting for a variety of reasons.
Mexico joined NAFTA in 1994. Mexico had 23 years to develop its industries. Nothing happened. Instead, only maquiladora "screwdriver" plants were built along the US-Mexico border.
Some Mexicans had been resentful of China. They thought that if China had never joined the WTO in 2001 then Mexico would have taken China's current position as a great industrial power. This kind of Mexican-nationalist reasoning is delusional.
Firstly, China is a top-ten annual holder of USPTO patents. In sharp contrast, Mexico has only held a negligible number of USPTO patents. There is a stark difference between Chinese innovation (e.g. Huawei in telecom, DJI in drones, Alibaba in online sales, SANY in construction equipment, etc.) and Mexican stagnation.
Secondly, China created a positive feedback loop from its exports. Chinese USPTO patents allowed China to charge above-market prices for its products. The surplus profits were plowed back into the businesses and this created national champions over time. Huawei dominates the worldwide telecom equipment business by being a pioneer in SDN (Software-Defined Networking). DJI has a dominant 70% of the worldwide consumer drone market. I bet you can't name a single Mexican company that dominates its business segment.
Thirdly, China conducts a large amount of basic science research. China is world #2 on the NATURE INDEX for published peer-reviewed scientific research papers. In comparison, Mexico is ranked at a dismal #35. According to the NATURE INDEX, China's science output is almost 100 times the Mexican output.
In conclusion, Mexico can no longer complain that Chinese wages are lower and create unfair competition. Mexico is now the lower-wage country. Unfortunately for Mexico, China will prove that wages are only a small component in manufacturing. China is investing heavily in industrial robotics and the Chinese manufacturing economy will continue to boom. Mexico's problem is that it always tried to blame others for its own failure to innovate and roboticize. A country's destiny has always been in its own hands. If you're willing to work hard and industrialize, it will happen. China has proved it in the last 40 years.
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World Economic Outlook Database, April 2017 | IMF
Mexico joined NAFTA in 1994. Mexico had 23 years to develop its industries. Nothing happened. Instead, only maquiladora "screwdriver" plants were built along the US-Mexico border.
Some Mexicans had been resentful of China. They thought that if China had never joined the WTO in 2001 then Mexico would have taken China's current position as a great industrial power. This kind of Mexican-nationalist reasoning is delusional.
Firstly, China is a top-ten annual holder of USPTO patents. In sharp contrast, Mexico has only held a negligible number of USPTO patents. There is a stark difference between Chinese innovation (e.g. Huawei in telecom, DJI in drones, Alibaba in online sales, SANY in construction equipment, etc.) and Mexican stagnation.
Secondly, China created a positive feedback loop from its exports. Chinese USPTO patents allowed China to charge above-market prices for its products. The surplus profits were plowed back into the businesses and this created national champions over time. Huawei dominates the worldwide telecom equipment business by being a pioneer in SDN (Software-Defined Networking). DJI has a dominant 70% of the worldwide consumer drone market. I bet you can't name a single Mexican company that dominates its business segment.
Thirdly, China conducts a large amount of basic science research. China is world #2 on the NATURE INDEX for published peer-reviewed scientific research papers. In comparison, Mexico is ranked at a dismal #35. According to the NATURE INDEX, China's science output is almost 100 times the Mexican output.
In conclusion, Mexico can no longer complain that Chinese wages are lower and create unfair competition. Mexico is now the lower-wage country. Unfortunately for Mexico, China will prove that wages are only a small component in manufacturing. China is investing heavily in industrial robotics and the Chinese manufacturing economy will continue to boom. Mexico's problem is that it always tried to blame others for its own failure to innovate and roboticize. A country's destiny has always been in its own hands. If you're willing to work hard and industrialize, it will happen. China has proved it in the last 40 years.
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World Economic Outlook Database, April 2017 | IMF
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