By Clint Richards
Beijing is attempting to improve regional relations in the run up to November’s APEC summit.
Chinese President Xi Jinping’s visit to Mongolia this week is creating expectation that significant trade deals are likely. Both sides need something. Mongolia needs more investment in its non-agricultural industries (particularly mining) as well as access to foreign markets via Chinese rail. That Xi’s visit to Mongolia is a stand-alone excursion rather than a multi-country tour shows how important this visit is to Beijing, and what it may possibly hope to accomplish in November.
While Mongolia remains worried about Beijing’s dominance of its economy, which accounts for 90 percent of its exports (mainly in coal and copper), it has little choice, with most export markets requiring at least transit through China. Bilateral trade has expanded from $324 million in 2002 to almost $6 billion in 2013, and Xi has proposed increasing it to $10 billion by 2020, according to Xinhua. As Mongolia’s economic growth has slowed from 11.7 percent in 2013 to 5.3 percent in the first six months of 2014, it may be persuaded to allow greater Chinese investment in the mining sector, despite previously blocking deals to buy large stakes in companies like mining firm SouthGobi Resources. Mongolia also needs investment in infrastructure, and its official policy seeks to balance Chinese and Russian interests with “third neighbors.” According to senior analyst Neil Ashdown at IHS Country Risk, a rail transit agreement is the most likely outcome of Xi’s current visit, as this would satisfy Mongolia’s needs for infrastructure while further attaching it to Chinese markets.
Read the full story at The Diplomat