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August 22, 2014

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Mongolia faced with slowing economy

PRESIDENT Xi Jinping yesterday proposed an expansion of bilateral trade with Mongolia to US$10 billion a year by 2020 as he arrived for a two-day visit aimed at deepening economic ties between the neighbors.

China also agreed to give the landlocked country access to ports in its north and northeast, Xinhua news agency said.

Xi met President Tsakhia Elbegdorj in the Mongolian capital, Ulan Bator, and plans to meet Prime Minister Altankhuyag Norov today and deliver a speech at the Great Hural, Mongolia’s parliament.

Xi’s arrival marks the first Chinese presidential visit in 11 years to Mongolia. He was accompanied by his wife Peng Liyuan.

“China and Mongolia are now standing at a new historical point in growing their relations,” Xi said at the capital’s airport.

Xi and President Elbegdorj signed a joint declaration to upgrade bilateral ties to a comprehensive strategic partnership.

The two sides noted that the upgrading is based on high-level mutual trust, a common aspiration for closer ties of mutual benefit, and a shared wish to stay forever as good neighbors, good partners and good friends who are mutually trustworthy and responsible.

The two countries also signed agreements to cooperate further in areas such as economics, energy, mining and finance.

In an article written by Xi for Mongolian newspapers, Xi said China would do all it could to help Mongolia develop.

“China hopes both countries can push cooperation on building interconnecting railways and roads, the development of mines and processing ... so that people in both countries can receive even more benefits,” Xi wrote.

Bilateral trade has soared to US$6 billion in 2013 from just US$324 million in 2002 and makes up more than half of Mongolia’s total foreign trade, Xinhua said.

China is the biggest investor in Mongolia, and also the largest market for its huge stocks of coal and copper. It already buys more than 90 percent of Mongolia’s exports, mainly of coal and copper, and 49 percent of foreign enterprises registered in Mongolia are Chinese, Xinhua said.

Mongolia aims to use its mineral wealth to modernize its isolated pastoral economy, but it has struggled to fund its plans.

A 2012 law aimed at restricting foreign ownership, since reversed, has also slowed foreign investment. It fell 70 percent in the first half of 2014.

Mongolia’s economy grew just 5.3 percent in the first six months, slowing from 11.7 percent in 2013.

Mongolia has previously sought to restrict Chinese firms from taking control of its assets, blocking a stake bid by state metals conglomerate Chinalco for the Mongolia-based miner SouthGobi Resources.

But slowing growth could persuade the government to permit greater Chinese involvement in its mining and infrastructure sectors, the two pillars of its long-term development plans.

Mongolia is also keen to use China’s rail network to deliver coal and other minerals to other markets.

“I think the most important deal we can get out of this visit is a rail transit agreement,” said Bontoi Munkhdul, chief executive of the Ulan Bator-based Cover Mongolia consultancy.

“Allowing rail access to seaports in China would allow us to export our commodities to other sea-borne Asian nations such as Japan or South Korea.”

But while the deal could give Mongolia more options, analysts expect most of its coal and copper to be sold to China for years to come.

The Ulan Bator government has already agreed to form a joint venture with Chinese coal giant Shenhua Group to build a rail link to help deliver Mongolian coal across its southern border.




 

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