Alibaba, Starbucks team up for strategic partnership www.chinadaily.com.cn

China's e-commerce behemoth Alibaba Group Holding Ltd and global coffee giant Starbucks announced on Thursday a deep, strategic new retail partnership to transform the country's coffee industry.

Date of Irregular Session of Parliament not set www.zgm.mn

Head of Parliament Secretariat Tsolmon Tsedev informed that the Speaker expressed his support for summoning the Irregular Session during a meeting on July 30. A number of MPs confirmed to ZGM on Tuesday that the Secretariat contacted them to check their availability. It revealed that many of the MPs are on local and international assignments, therefore unable to participate in the irregular session, if summoned. According to the Law on Parliament, more than half of the members need to be available for the Parliament to convene. Currently, there are 75 members in the Parliament after Gantulga Dugar resigned. This makes the number of members that need to be available 38. Considering that 26 MPs signed a petition to summon the Irregular Session of Parliament, the Parliament’s Secretariat need only a dozen more members to summon the session.

Government convenes first time in 2 weeks to discuss flood relief actions www.zgm.mn

Government of Mongolia decided on Wednesday to release funds needed for restoring Ulgii soum, the center of Bayan-Ulgii province. 2500 people of 530 families have been hit by the flood. Three people have been injured, 287 houses have been destroyed and numerous houses, fences and gers have been drowned in water. Currently, the total toll is estimated at MNT 15.6 billion, and MNT 540 million is required to take necessary preliminary actions to help restore the soum. Government decided to provide MNT 468 million of the necessary funding from the Government’s Reserve Fund, and the remaining from the province and the soum’s reserve fund. Civil and international organizations, private entities and NGOs had also taken actions to help residents of Bayan-Ulgii province, the area heaviest hit by flood within the country. World Vision Mongolia, Mongolian Red Cross Assiciation, ADRA and Caritas collectively donated approximately USD 115,000 worth of products to help. The continued heavy rains all over the country has been a major hit to Mongolia’s infrastructure. A total of 116 km road in Arkhangai, Bayan-Ulgii, Bulgan, Gobi-Altai, Dornogobi, Zavkhan, Uvurkhangai, Sukhbaatar, Selenge, Tuv, Uvs, Khovd and Khuvsgul provinces was damaged. The Government decided to release MNT 1.3 billion funding for restoring the roads from the Government’s Reserve Fund.

Canada helps Russia build railroad to bypass Ukraine www.rt.com

Canada's aerospace and transportation giant Bombardier was one the contractors building a Russian railroad link that bypasses the war-torn territories of Ukraine, reports Globe and Mail.
The railroad stretch links the Voronezh and Rostov regions near the Ukrainian border and bypasses Ukraine’s Lugansk region. The construction of the rail link between the towns of Zhuravka and Millerovo began in 2014, after the deterioration of relations between Russia and Ukraine, and was completed last year. The railroad that was used before has 26 kilometers which pass through the war-torn Lugansk region in Ukraine. The new stretch is 137 kilometers.

Mongolia to support startups to diversify economy www.xinhuaner.com

ULAN BATOR, Aug.1 (Xinhua) -- Mongolia will support innovative startups with tax-exemption policies to diversify its mining-dependent economy, Minister of Education, Culture, Science and Sport Tsedenbal Tsogzolmaa said Wednesday.

China and Japan’s Investment Competition in Mongolia www.thediplomat.com

China and Japan are two of the most financially influential countries in Mongolia’s proximity. Both have a long history of trade and investment in the latter. Mongolia calls Japan its “Third Neighbor,” which is a term first used in 1990 by then-U.S. Secretary of State James A. Baker who referred to the United States as Mongolia’s “Third Neighbor.” Mongolia then adopted the “Third Neighbor” policy aim at broadening its foreign relations outside of China and Russia to other countries like Japan, the United States and European countries. Japan has traded with Mongolia since the 13th century through the Steppe Road and is currently Mongolia’s third largest source of imports. Since Mongolia became a democratic country in 1990, Japan has consistently provided aid and assistance for its transition to a market economy.

China is one of Mongolia’s closest partners and has traditionally been its biggest trader and investor. By July 2017, China directly invested $4.1 billion in the country which accounted for 30 percent of Mongolia’s foreign investment. However, as China asserts more economic influence in Mongolia via the Belt and Road Initiative, the Tokyo-Beijing relationship has become increasingly complicated. With China’s rise, Japan has felt the urgency to balance and compete with China in the region. Is the development competition between China and Japan beneficial or detrimental to Mongolia? And how can Mongolia maintain and expand its interests within this complicated relationship?

China-Mongolia-Russia Economic Corridor

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Since China began its comprehensive strategic partnership with Mongolia four years ago, their partnership expanded their economic cooperation, prioritizing natural resources and infrastructure. They also pledged to strengthen security cooperation through increased political communication. In 2014, President Xi Jinping first initiated the China-Mongolia-Russia Economic Corridor (CMREC) as part of the Belt and Road Initiative, furthering its goal to develop infrastructure and industrial projects to establish free trade and economic cooperation zones in cross-border cities. Some of the more well-known projects include the China-Mongolia Cross-border Economic Cooperation Zone from Erenhot to Zamiin Uud, and the Northern Railway Corridor which extends the national rail network to connect Mongolia with Russia and China.

By contrast, Japan started its development projects in Mongolia in the late 90s and early 2000s. In 2003, Mongolia joined the Central Asia Regional Economic Cooperation (CAREC) Program implemented by Asian Development Bank (ADB) in which Japan is one of the two largest voting powers with 15.6 percent. So far there are 301 ADB projects in Mongolia. Just one year after China announced CMREC, Japan’s Prime Minister Shinzo Abe signed Japan’s first economic partnership agreement (EPA) with Mongolia in 2015. He pledged to reduce tariffs and provide an additional $330 million in loans of 0.1 percent annual interest rate for the construction of a new international airport in the nation’s capital city Ulaanbaatar. Potentially inspired by the CAREC, China’s CMREC intends to compete with it while targeting specifically development in Mongolia instead of all Central Asian countries.

Sino-Japan Competition Open Doors

While China and Japan are funding different projects through their respective frameworks, the results of their projects have the potential to complement each other. For example, while Japan provided $500 million in soft loans to construct a new airport in Ulaanbaatar, the Export–Import Bank of China funded $140 million in soft loans to build a highway connecting the airport to the city. These two projects are inseparable — while an airport without a road leading to it is useless, a road leading to nothing is futile. Together they improve the effectiveness of the country’s infrastructure.

Their competition also provides more options for Mongolia. In 2016, Mongolia invited the Dalai Lama to give lectures on Buddhist teachings to the people. At the time the country was going through a debt crisis and sought a large loan from China, the only country willing to lend money with low interest rates. In order to solicit the loan, Mongolia, a country with ancient ties to Tibetan Buddhism, apologized to China and pledged not to invite Dalai Lama again. This incident demonstrated Mongolia’s dependence on China to the extent that it was willing to forsake faith in search of financial assistance.

Japan can provide this diversity of partnership to alleviate this pressure. While Mongolia and China’s relations were strained by the incident with the Dalai Lama, Japan was able to utilize its resources in financial platforms to help create an international aid framework providing Mongolia approximately $5.65 billion. This framework is backed by the International Monetary Fund, the World Bank, the Asian Development Bank, Japan, South Korea and China to relieve the financial challenges faced by Mongolia. During a time of political tension, diversification of loan sources helped Mongolia.

China and Japan’s Complementary Investments

It is interesting to note the difference between China and Japan’s investment strategy. While China’s investment in Mongolia is done mostly in direct lending between the two countries or through several new Chinese-led multilateral frameworks such as the Asian Infrastructure Investment Bank (AIIB) in which China has 26.6 percent of voting power, Japan contributes through multilateral organizations that have established longer reputation with more experiences such as the Asian Development Bank, the World Bank and the International Monetary Fund.

Each has their own strengths and weaknesses. China’s accumulated experiences in financing and building infrastructure projects and its ambitious Belt and Road Initiative will enable Mongolia to be more connected with Europe and rest of Asia through roads and access to the sea via ports. However, some Chinese investment lacks international oversight and comes with political strings like in the case of the Dalai Lama incident. Meanwhile, Chinese investment in large infrastructure projects drove Mongolia’s capital expenditure surge in 2013, thus contributed to an abrupt rise of debt-to-GDP ratio from 2015 to 2016.

Japanese funding comes from more transparent sources that can help diversify the risks for the borrowing country, in turn providing global knowledge transfer and technical assistance to promote sustainable development. The downfall is that it has a higher threshold for Mongolia whose credit rating is low and whose public debt reached almost 100 percent of GDP last year.

For Mongolia, this is an opportune time to work through China, Japan, other “Third Neighbor” countries such as South Korea and Canada, and international financial institutions to diversify away from raw materials, being selective about the projects that can provide long-term sustainable benefits such as investing in human capital and technology advancement. In this trilateral relationship, each country has something to offer and Mongolia needs to establish its own development strategy based on its national interests in order to prevent itself from being caught between its two stronger neighbors.

Yiyi Chen is a master’s candidate at the Fletcher School of Law and Diplomacy at Tufts University. She studies international law, East Asia foreign affairs, and development economics.

More Solar Power Comes Online in Mongolia www.powermag.com

The Mongolian government in late June commissioned the country’s second photovoltaic (PV) solar power plant, a 15-MW facility in the province of Dornogovi, in an “economic development zone” of Zamyn-Üüd. The country is increasing the use of solar power as it phases out coal-fired generation. The Dornogovi plant is 50% larger than the nation’s other solar facility (Figure 1), a 10-MW project in Darkhan built by Shigemitsu Shoji Co. Ltd. and Sharp Corp. in partnership with Solar Tech LLC, a Mongolian company. That plant came online in January 2018.

China's Steelmakers Are Smashing Production Records www.bloomberg.com

China’s steelmakers are smashing production records by pushing furnaces beyond their typical limits, offsetting nationwide closures that may be even more swingeing than government estimates, according to Goldman Sachs Group Inc.

The world’s top producer has trumpeted sweeping reforms in the past two years that have shuttered aging and illegal plants, and shackled winter output in the dirtiest regions. At the same time, official data shows output at record highs. That’s partly because, with demand robust and margins high, mills have rewritten their steel-making recipes to push output beyond normal capacity, says Goldman’s Hong Kong-based analyst Trina Chen.

“For the same blast furnace, mills can deliver an extra 10 percent or more steel than before,” Chen said by email. Operators are using iron-rich ores to boost productivity, and raising the portion of steel scrap in their feed-stock to as much as 30 percent from about 10 percent historically. “The trend is continuing this year but they are approaching their stretchable limit,” she said.

China’s average daily output was a record in June, taking first-half volumes to a best-ever 451 million metric tons, more than half world production. The unprecedented run-rate has yet to trouble a prolonged period of profitability that most analysts attribute to steady demand growth, on top of the reforms driven by President Xi Jinping as a pillar of his economic agenda.

Baoshan Iron & Steel Co., the listed unit of China’s biggest producer, climbed in Shanghai on Wednesday, and other mills advanced after the country’s leaders signaled a fresh focus on bolstering economic growth. Reinforcement bar futures surged to their strongest level in five years.

Goldman said in July that Chinese steel stocks could rally another 60 percent in the next year, and that’s after profits already jumped 151 percent in the first half, according to the China Iron & Steel Association.

China’s capacity has shrunk by about 200 million tons to around 800 million tons, taking into account state-ordered closures and the long-term idling of facilities after the global steel market collapse of late 2015, according to Goldman. Those figures are out of step with the consensus, though. Consultancies Kallanish Commodities Ltd. and Shanghai Steelhome E-Commerce Co. estimate net cuts have been deeper, but that capacity remains at about 1 billion tons, a figure supported by government data.

“We have taken account of steel capacity that went into ‘long-term maintenance’ in early 2016 due to poor profit conditions and bank credit withdrawal,” Chen said. “They remain ‘under maintenance’ until now, which suggests most would not recover despite the improved profit of the industry. This is the major difference between our numbers versus official reported numbers.”

Debate around China’s steel industry is often clouded by doubts over official statistics, and the challenge of gathering accurate data on a sprawling and fragmented industry. The country’s overcapacity problem is “not fundamentally solved,” the listed unit of top producer China Baowu Steel Group said in April. The other end of the spectrum from Goldman includes China Beige Book, a New York-based consultancy that closely monitors Chinese industry. It says steel capacity has actually risen since 2015 as new commissions offset shutdowns.

“The Chinese just claimed they cut hundreds of millions of tons of capacity, and what we’re saying is they actually added it,” Leland Miller, the researcher’s Chief Executive Officer said by phone. The organization conducts regular surveys of 100 or more companies in the steel sector to gauge their investments, hiring and other activities.

For Miller, the industry’s improvement has come, not through supply-side reforms, but from stronger consumption and a wave of speculative demand from investors pouring into steel futures. Recent stimulus promises from Beijing are also fueling hopes that steel’s renaissance will extend through the end of the year as spending on infrastructure picks up.

— With assistance by Martin Ritchie, and Krystal Chia

Mongolia seeks opportunity to supply agricultural products to Japanese market www.montsame.mn

Ulaanbaatar /MONTSAME/ On July 31, Minister of Food, Agriculture and Light Industry B.Batzorig received representatives headed by the Governor of Japan’s Shizuoka Prefecture Heita Kawakatsu. Minister B.Batzorig expressed his gratitude to Mr Heita Kawakatsu for making contribution to expanding ties and cooperation between the two countries.

Construction complete on Inner Mongolia high-speed railway www.chinadaily.com.cn

HOHHOT -- Construction was finished Tuesday on the first high-speed railway in North China's Inner Mongolia autonomous region, according to the builder.