As the US and Europe tighten their restrictions on clean technology imports from China --- solar panels, batteries, components, etc --- the Middle Kingdom is actively looking for bases from which its companies can manufacture --- and export --- items without inviting countervailing duties.
Thailand has emerged as one such country, with Chinese carmakers actively scouting for locations to set up electric vehicle plants in the country which can service exports to Southeast Asia and elsewhere. In fact, they have even captured the domestic market, long a preserve of Japanese car brands such as Honda, Toyota and Nissan.
A similar story --- but perhaps on a wider scale --- in playing out in Africa, where Chinese companies are busy setting up shop in Morocco.
Morocco has a free trade agreement with both, the US and Europe, allowing goods manufactured there to enter both markets without attracting anti-dumping duties or trade-protection tariffs of the kind both parties have imposed on goods originating from China.
Chinese companies, therefore, and making a beeline for the North African kingdom, looking to take advantage of its trade agreements and bypass import restrictions and tariffs.
Li Changlin, China's ambassador to Morocco, claims his country's investment in the North African nation's EV and new energy sectors has "exploded".
The Kingdom of Morocco, has "become a new hotspot for Chinese companies to invest overseas," Li said, adding: "Chinese companies have invested heavily in Morocco's renewable energy, new energy vehicle batteries and other fields, playing a positive role in promoting Morocco's energy transformation and the development of the automotive industry."
Among Chinese projects in the country, the Middle Kingdom is constructing the Mohammed VI City for Science and Technology, a manufacturing and technology hub, through a group of companies led by China Road and Bridge Corp.
Then there is the Tangier tech hub, which will host hundreds of Chinese companies. The project, coming up at an investment of $1 billion, will be home to Chinese battery maker BTR New Material Group, which is setting up a cathode manufacturing facility at an investment of $300 million.
Li, who has visited both sites, called the Tangier project "an important symbol of the high-quality joint construction of the 'belt and road' between China and Morocco".
Behind the Moves
The US and Europe both imposed restrictions on Chinese cleantech goods earlier this year, wary of fears that China might dump excess production into their markets and wipe out local competition.
The US announced new levies on $18 billion worth of Chinese imports in May, including a 100 percent tax on imported Chinese EVs, a 50 percent tax on Chinese solar cells and a tripling of the tariff on lithium-ion batteries for EVs and lithium batteries meant for other uses.
America said the new levies were necessary to protect its domestic industries from unfair competition, with a senior official telling journalists that "China is producing at a rate and with a trajectory that's far in excess of any plausible estimate of global demand," adding: "That is going to flood the global market with supply that undercuts our ability to build productive capacity at home and ... leaves all of us across the world more vulnerable to economic coercion."
The European Union followed in the next month, raising tariffs on Chinese EVs to protect the continent's motor industry. The bloc differentiated between carmakers and imposed different duties, which peaked at 38.1 percent. It said the decision was made to protect the bloc's auto industry from "market-distorting subsidies" from the Chinese government.
Benefits beyond tariffs
In addition to bypassing duties, setting up manufacturing facilities in Morocco offers Chinese companies another benefit: tax breaks. Because of the kingdom's free-trade agreements, goods made in the African kingdom qualify for incentives under the US Inflation Reduction Act, a misleadingly named legislation that is aimed at boosting the country's cleantech capabilities.
The IRA, with a purse of $430 billion, offers tax credits to American consumers who buy EVs rather than conventional, fossil-fuel-powered vehicles.
Morocco's free-trade deal with the EU allows Chinese companies to bypass tariffs from the trade bloc as well. The grouping recently brought out its own cleantech boosting law to compete with the US in attracting investments.
Given these advantages, Morocco has attracted multibillion-dollar investments into its battery and EV industries. Among them:
- A $1.4 billion giga factory investment from Chinese battery maker Gotion. The plant will begin production in the third quarter of 2026 with a capacity of 20 GWh per year.
- CNGR Advanced Material, a battery parts maker from the Middle Kingdom, has joined hands with Moroccan private investment fund Al Mada to build a $2 billion industrial base in the African kingdom.
- Youshan, a subsidiary of China's biggest cobalt refiner Huayou, has partnered with South Korea's LG Chem to build a lithium-iron-phosphate (LFP) cathode materials plant in Morocco. Youshan plans to sell its output in the US.
To be fair, Morocco is not the only country that Chinese companies are investing in. BYD, the country's largest EV maker, is setting up battery capacity in Hungary and a car plant in Turkey.
Morocco itself is already a major car manufacturing hub for large European carmakers including Stellantis and Renault --- official data show the auto industry accounts for around a fifth of the kingdom's GDP, and last year exported about $6.4 billion worth of passenger vehicles --- and both companies might well choose to retool their plants to manufacture EVs.
Expert View
Sustainability expert Abdelmonim Amachraa told the South China Morning Post Chinese factories in Morocco reflected the global reconfiguration of supply chains as part of the econo-geographic integration currently under way, where countries are looking to have their supply chains shortened and relocated to within their economic spheres post the pandemic.
Amachraa, who worked in Morocco's Ministry of Industry and Trade in a previous role, told SMCP: "As companies seek to mitigate risks related to geopolitical tensions and trade barriers, regional hubs like Morocco become increasingly important."
"By setting up production in Morocco, Chinese companies can bypass these obstacles by producing locally and meeting the necessary standards from the outset. Morocco, with its trade agreements and favorable regulatory framework, can play a crucial role in facilitating this transition," he added.