China is now Mongolia’s largest trading partner and its second-largest source of foreign investment. The two countries recorded bilateral trade of $4.96 billion in 2016, and although the full-year figures for 2017 have yet to be revealed, trade had already jumped by 44.2 percent year-on-year to $3.1 billion in the first half of last year.
During last year’s Belt and Road (B&R) Forum for International Cooperation in Beijing, the leaders of the two countries reached a consensus to effectively dovetail the B&R initiative with Mongolia’s Prairie Road development initiative. The two sides also signed an array of agreements on economic and trade cooperation.
The second China-Mongolia Expo was also held in September, with a total of 37 projects signed between the two countries. The projects, covering energy, agriculture, big data and cloud computing, involved investment totalling 36.4 billion yuan ($5.58 billion). In addition, Mongolian coal exports to China, mainly through the Ganqimaodu Port in North China’s Inner Mongolia Autonomous Region, saw a substantial increase in 2017.
In a nutshell, the two countries have made great progress in bilateral economic and trade cooperation over the past year, laying the foundations for closer economic ties in 2018.
The two nations have set a target of increasing bilateral trade to $10 billion by 2020, which will require efforts from both governments to boost trade and economic cooperation. Since the Mongolian People’s Party swept back to power in 2016, Mongolia has moved to cut budget deficits, boost foreign investment and push for mega mining projects in the hope of overcoming its recent economic crisis. To ensure that such measures can come to fruition, Mongolia should seek closer trade and economic cooperation with China.
Official state visits to China by Mongolian President Khaltmaagiin Battulga and Prime Minister Ukhnaagiin Khurelsukh are expected to take place this year, according to media reports. These will be their first China visits since taking office, and if the visits go as planned, a firmer political foundation will be built for bilateral trade and economic cooperation, and plans for further cooperation down the road will be made much clearer.
It is expected that trade and economic cooperation between the two nations will revolve around four main aspects in 2018.
First, the priority areas for bilateral cooperation will likely make headway. The initiatives designed to enhance connectivity between the two nations – notably some mega projects, and the launch of a joint feasibility study for a Sino-Mongolian free trade zone – will be of importance for deepening bilateral trade and economic cooperation and will play a big part in creating synergy between the two countries’ development strategies. Discussions about how progress can be made in these areas are expected to be a priority for high-level talks and meetings between the two countries this year.
Second, China will continue to lend money and provide financial aid for Mongolia. Financial help from China can already be seen playing an active role in easing Mongolia’s economic crisis. Chinese Foreign Minister Wang Yi held talks with his Mongolian counterpart Damdin Tsogtbaatar in Beijing in December, stating that China will continue its support for Mongolia with ramped-up implementation of financial aid for the country and a preferential export buyer’s credit project. The continuation of China’s financial assistance for Mongolia in 2018 will certainly be a focal area for cooperation between the two governments.
Third, there will be strengthened efforts to build the China-Mongolia cross-border economic cooperation zone. There are signs that Mongolia’s newly elected government has attached importance to building the zone. The Mongolian side’s proactive moves, it is believed, will foster greater bilateral cooperation on this project.
Last but not least, trade disputes between the two countries, primarily concerning Mongolia’s exports of coal and meat to China, will call for enhanced communication between the two nations so as to pave the way for wider trade and economic cooperation in 2018.