Mongolian President Khurelsukh Ukhnaa’s latest state visit to Beijing placed a strong emphasis on China-Mongolia economic ties and thus reflected how Mongolia’s foreign policy supports these efforts. As Mongolia continues to diversify its mining-dependent economy, Beijing, as its comprehensive strategic partner, will continue to play an active role in investment and development projects.
On November 28, Khurelsukh held official talks with Chinese President Xi Jinping. Khurelsukh’s state visit to China marked the second high-level meeting between the two leaders since the COVID-19 outbreak. The official talks between the heads of state not only shed light on China-Mongolia economic cooperation, but also Mongolia’s foreign policy towards China.
Mongolia’s landlocked position naturally forces Ulaanbaatar to maximize trade and economic activities with Beijing. China, as one of Mongolia’s two immediate neighbors and, moreover, as one of the major economic powers, necessarily has a huge impact on Mongolia’s own development.
The two countries’ economic relations have faced challenges since the border closures amid the pandemic. However, despite China’s protracted zero-COVID policy, the two counties managed to double their 2021 export levels last year and launched new railway developments, such as the 227-kilometre Zuunbayan-Khangi railway.
Mongolian economic activities presented a positive outlook through the third quarter of 2022, even though China’s zero-COVID policy was still in full effect at the time. According to the Mongolian Bank“Economic activity was relatively stronger than expected in the third quarter of 2022, surpassing pre-COVID-19 levels.”
In December 2022, the same month that China finally lifted its tough COVID-19 restrictions, Mongolia’s coal exports nearly tripled, from 1,165 tons to 2,932 tons.
Amid the effort to open the borders between Mongolia and China, Beijing requires certain measures to prevent the further spread of COVID-19. Mongolian tourists and Chinese border crossers will be required to fill out paper and online entry forms, as well as show a PCR test result within 48 hours of entry.
Meanwhile, as COVID-19 rages in a newly reopened China, Mongolia is also concerned about imported cases. Although reviving economic activities is a priority for the Mongolian government, there is no guarantee that those who return will be free of COVID.
During the Khurelsukh-Xi meeting, Xi noted that China’s development plan includes contributing to the development of its neighbors and that China is ready to speed up projects in Mongolia. Khurelsukh reiterated that Mongolia’s economic plans, the New Renaissance Policy and the long-term development policy document, Vision 2050, can be a parallel development strategy of China’s Belt and Road Initiative (BRI). The two-step strategy envisioned by Mongolia includes strengthening the “trade, investment, finance, mining, energy, infrastructure, e-commerce and green energy” sectors.
While these talking points may herald a new direction between Ulaanbaatar and Beijing, the overall China-Mongolia economic relationship is an ongoing effort on Mongolia’s part and its trajectory has not deviated noticeably from previous administrations. For Mongolia, geography will always dictate the country’s economic goals, but it is the administration of the day that will execute certain economic plans.
Therefore, strengthening economic relations between China and Mongolia is a never-ending endeavor, only with new twists and mega-projects.
A major export destination for Mongolian minerals, China has invested more in the mining sector than in any other developing sector, but with parallel growth and development, Mongolia can benefit from major infrastructure projects as long as there are sufficient funds.
In 2013, Mongolia and China established a medium and long-term strategy to boost economic relations. One of the main challenges for Mongolia was its incomplete infrastructure, which restricts economic activities, particularly the maximization of mineral exports. Therefore, since 2013, through different administrations, improving Mongolia’s basic infrastructure has always been a great investment opportunity for foreign companies. And China, as a big investor, tends to get big infrastructure acquisitions.
This could explain why the current prime minister, Oyun-Erdene Luvsannamsrai, has pushed to build infrastructure to support Mongolian exports, despite the fact that the most direct beneficiary is the mineral sector. The hope is that better infrastructure will boost overall growth and fuel long-term plans for economic diversification.
The Oyun-Erdene administration has been putting a lot of emphasis on major infrastructure deals and the start of construction of projects as one of the main sources of economic potential for the country. In his latest press release, the prime minister declared Mongolia as “The Year of Travel 2023-2024.”
One of the main policy recommendations is to establish a Free Trade Zone (FTZ) in government-approved areas to boost cross-border trade and the development of transit cities and towns such as Zamiin Uud and Erlian. Border trading cities like Erlian survive on Mongolian businesses.
Building on Khurelsukh’s bilateral talks with Xi in November 2022, China will maintain its comprehensive strategic partnership with Mongolia and is willing to strengthen the two-step strategy, which can bring parallel growth and development in both societies.
the joint declaration issued after the summit referred to important bilateral agreements between the two countries, such as the 1994 Agreement on Friendly Relations and Cooperation between Mongolia and the People’s Republic of China, followed by the 2014 Joint Declaration on the Establishment of a Comprehensive Strategic Partnership between Mongolia and the People’s Republic of China. Republic of China. In addition, the Khurelsukh-Xi joint statement affirms the agreement and mutual understanding on the importance of continuing the comprehensive strategic partnership, which upholds the interest of the people of the two nations.
Mongolia’s bilateral relationship with China has more economic nuances than political. Mongolia’s landlocked position naturally makes it more difficult to access neighboring third countries. Therefore, Mongolia’s comprehensive strategic partnership with Beijing is a strategic move to maximize the country’s economic potential. With China’s zero COVID policy now in the rear view mirror, Ulaanbaatar hopes to maximize the gains from the relationship after three years of disruptions.