Crossroads Asia

Mongolian Prime Minister’s Visit to China Envisages Deeper Economic Ties

Recent Features

Crossroads Asia | Diplomacy | East Asia

Mongolian Prime Minister’s Visit to China Envisages Deeper Economic Ties

Both China and Mongolia are keen to expand their economic ties, and state-owned enterprises will play a key role in that.

Mongolian Prime Minister’s Visit to China Envisages Deeper Economic Ties

Chinese Premier Li Qiang, right, shakes hands with Mongolia’s Prime Minister Luvsannamsrain Oyun-Erdene during a signing ceremony at the Great Hall of the People in Beijing on June 28, 2023.

Credit: Jade Gao/Pool Photo via AP

Mongolian Prime Minister Oyun-Erdene Luvsannamsrai paid an official visit to China from June 26 to July 1, with stops in Beijing, Tianjin, and Ningbo, home of the world’s largest port. During his trip, Mongolia and China finalized a number of cooperation agreements that have previously been discussed, further deepening economic ties, particularly in energy, and infrastructure.

The Mongolian delegation, headed by Oyun-Erdene, was welcomed by Chinese Vice Minister of Foreign Affairs Sun Weidong, Chinese Ambassador to Mongolia Chai Wenrui, and Mongolian Ambassador to China Badral Tuvshin. During his week-long trip to China, Oyun-Erdene held an official meeting with Chinese President Xi Jinping, attended the World Economic Forum’s annual meeting in Tianjin, and met with leaders of some Chinese state-owned enterprises.

On June 27, Xi received Oyun-Erdene and the Mongolian delegation at the Great Hall of the People. The high-level meeting between the two leaders, followed by one-on-one meetings with Chinese officials and industry leaders, revealed Ulaanbaatar and Beijing’s shared interest in enriching the two countries’ economic ties within the framework of their comprehensive strategic partnership.

According to the press release of the Chinese Foreign Ministry, during the meeting “Xi Jinping stressed that China and Mongolia should always stay committed to respecting each other’s national independence, sovereignty, and territorial integrity, respecting the development paths independently chosen by the two peoples, and firmly supporting each other on issues involving their respective core interests and major concerns.”

In response, Oyun-Erdene stated that “Mongolia is ready to work closely with China to continue respecting and supporting each other’s choice of development paths, promote high-quality Belt and Road cooperation, strengthen inter-party and youth exchanges, advance connectivity projects such as cross-border railways and port connectivity between the two countries, and deepen cooperation in economy and trade, investment, energy, green development, anti-corruption, and other areas.”

In the last five years, Mongolia and China have prioritized expanding economic ties in a wide range of sectors. Many of the developmental projects – such as the construction of major railways connecting Mongolian and Chinese trade ports, and the construction of roads and freeways – represent parallel growth with Beijing’s own development. The Oyun-Erdene administration, particularly, has been proactive in bolstering infrastructure agreements, which are a lifeline of Mongolia’s mining and export sector at large.

Oyun-Erdene’s visit to Beijing can be viewed as a follow-up to Mongolian President Khurelsukh Ukhnaa’s visit to China in November 2022 – or rather a push to actually implement the development projects agreed to during that visit. During Khurelsukh’s meeting with Xi, the Mongolian president stated that Mongolia’s New Revival Policy and its long-term development policy paper, Vision 2050, can be a parallel development strategy of China’s Belt and Road Initiative (BRI). This is something Oyun-Erdene repeated during his meetings with Xi and other officials.

On June 28, Oyun-Erdene held official talks with Chinese Premier Li Qiang. The two sides agreed to intensify cooperation and connectivity between border ports Gashuunsukhait in Mongolia and Gantsmod in China; Shiveekhuren (Mongolia) and Sekhe (China); and Bichigt (Mongolia) and Zuunkhatavch (China).

According to the Office of the Cabinet, Oyun-Erdene pointed out that “Mongolia has completed the construction work of our site to connect Gashuunsukhait-Gantsmod, Shiveekhuren-Sekhe, Bichigt-Zuunkhatavch, [and] Khangi-Mandal ports by rail.”

Currently, China buys almost 95 percent of Mongolia’s exports. It’s easy to see, then, why border ports such as Shiveekhuren-Sekhe carry strategic relevance to Ulaanbaatar’s economic security. Investment in these sectors is crucial for Mongolia to meet the demands of a quickly changing economic and geopolitical environment.

Facilitating faster movement through border ports has thus been a key goal for the Mongolian side. The Bichigt-Zuunkhatavch border was closed in 2021 amid China’s pandemic controls. It only resumed normal operation in July 2022. The construction of a 7.1 kilometer railway that links Shiveekhuren-Sekhe Port is expected to be completed in six months. This is part of Ulaanbaatar’s push for Beijing to accelerate the process of implemetning previously discussed projects.

Following his meeting with Xi, Oyun-Erdene met with the leaders of Chinese state-owned enterprises such as Power China, China Energy, China National Offshore Oil Corporation, Power China, China State Construction Group, and Norinco.  As the Montsame News Agency reported, “About 25 cooperation agreements, totaling three billion yuan [$414 million], were signed during the ‘Mongolia-China Trade and Economic Cooperation’ Forum,” which took place during his state visit.

Moreover, the signing of a Memorandum of Understanding between the Mongolian and Chinese agencies responsible for overseeing state-owned enterprises (SOEs) presages greater cooperation between the SOEs of Mongolia and China in renewable energy, technology and innovation, hydroelectric power plants, oil, and gas producing technologies. An important takeaway from the high-level meetings is the financing of mega projects such as the Erdeneburen hydropower plant and the Choibalsan power plant expansion project.

Coinciding with Oyun-Erdene’s visit to Beijing, China hosted the 2023 World Economic Forum’s “Annual Meeting of the New Champions” in Tianjin, sometimes dubbed the “Summer Davos.”

At the WEF, Oyun-Erdene showcased Mongolia’s progress in recovering from the pandemic and introduced his administration’s implementation of the New Recovery Policy. Addressing global leaders from governments and the private sector, Oyun-Erdene encouraged both the private and public sectors to invest in Mongolia’s science, information technology, and sectors that demand innovation and modernization.

Moreover, during a one-on-one meeting with Klaus Schwab, founder and executive chairman of the World Economic Forum, Oyun-Erdene discussed Mongolia’s challenge as a landlocked economy and the need for assistance and cooperation, with a particular focus on transportation and logistics sectors. Oyun-Erdene invited Schwab to attend the Mongolia Economic Forum, which will take place from July 9-10 in Ulaanbaatar.

Oyun-Erdene’s week-long official visit to China revealed both intent and motivation on Ulaanbaatar’s part to accelerate the two countries’ economic activities within the framework of the comprehensive strategic partnership. Although Oyun-erdene’s visit centered around activating many of the bilateral projects that Mongolia and China have previously discussed, this was also an opportunity for Mongolia to seek investment and promote tourism.

Since he took office in 2021, the Oyun-Erdene administration has heavily invested in new infrastructure projects, specifically to bolster trade with China. It has undertaken major expansions to existing land ports on the border, establishing a comprehensive 3,000 km road network to connect border ports for efficient transportation, and doubling the number of active airports to alleviate pressure on ground-based infrastructure. Free trade zones such as Zamiin-Uud, which already handles 70 percent or more of Mongolia’s total trade volume, are also being established to provide tax and regulatory incentives for business and connect key parts of the transport network.

One major takeaway from Oyun-Erdene’s official visit to China is that both the Mongolian and the Chinese governments are willing to enrich their comprehensive strategic partnership and major development projects will involve state-owned enterprises. While it is paramount for the government to implement policies that can and will diversify the country’s economy, it is equally important to include the private sector in developmental projects.

On a bilateral level, considering Ulaanbaatar’s strong traditional ties with Beijing, the continued exchange of high-level visits entail a parallel growth between the two countries. Mongolia can combine a close relationship with China with greater openness to international investment in general, by diversifying sources of investment.