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China-Mongolia trade has ‘room for improvement’, with investment potential in tech, finance www.scmp.com
Batshugar Enkhbayar has big ambitions for his homeland of Mongolia.
The US-educated legislator, who sits on two parliamentary committees, has helped pass laws encouraging the use of cryptocurrency and the protection of personal data. He is inspired that many in the electoral democracy of 3.4 million people already make cashless payments.
Though the country’s economy is best known for its mineral riches, such as coal, copper, gold and nickel, Enkhbayar, a former central bank deputy governor, wants to change that.
The son of Mongolian ex-president Nambaryn Enkhbayar – whose time in office was tarnished by corruption allegations – is pushing to diversify the economy away from extractive industries, which were shaken in 2015 when commodity prices slumped.
To do so, Enkhbayar is looking to China for investment in other sectors beyond mining, particularly into the technology sector.
“Mongolia has potential to become a Central Asian financial hub,” the 35-year-old lawmaker told the South China Morning Post on Friday. “Going forward, I’d like to see China invest more in finance and more into infrastructure.”
China is well positioned to help because since 1990 it has channelled an average of 9 per cent annually from its total US$5.8 billion worth of Mongolian foreign direct investment (FDI) into the finance sector, he said, higher than the average amount invested from other nations.
China’s history of trade in Mongolia – with whom it shares a 4,630km-long (2,877 miles) land border – has allowed it to develop diverse business interests in the country, Enkhbayar said.
Mongolians protest Beijing’s language policy in Inner Mongolia as Chinese foreign minister visits
Mongolians protest Beijing’s language policy in Inner Mongolia as Chinese foreign minister visits
“It’s the world’s second largest economy and right next to us,” the former investment banker said. But given China’s size, he added, “I think there’s room for improvement.”
While trade ties stretch back centuries, there have been recent flashpoints in the relationship.
A decade ago, Mongolians fretted about illegal Chinese labour in their country, where according to the Asian Development Bank 27.8 per cent of the population lived below the poverty line in 2020.
In 2020, some protested against Beijing’s guidelines to replace Mongolian with Mandarin Chinese as the language of instruction for some subjects in China’s Inner Mongolia autonomous region.
But the coronavirus pandemic turned public opinion, the lawmaker said, as border closures made many Mongolians realise that their arid, landlocked country depends on China for shipments of cars, clothing and vegetables.
“We could see how important Chinese goods were for our daily lives,” said Enkhbayar, who was elected to the Mongolian parliament in October. “For a landlocked country like Mongolia, it’s very important for us to have a good trading relationship.”
Mongolia owes about US$1 billion in loans to the Chinese government, Enkhbayar said, but repayment should be manageable given China’s “concessional” terms.
Exports of coal briquettes to China are worth US$2.1 billion per year to the Mongolian economy and copper ore shipments US$635 million, according to the Observatory of Economic Complexity (OEC) database.
For manufacturing powerhouse China, coal briquettes represent an energy source, while copper ore is used to make wiring and other metal alloys.
But Mongolia has a growing tech scene, with 109 start-ups currently, many of whom work in financial technology, Enkhbayar said.
He believes the Mongolian government should follow the lead of other small nations like Estonia and Norway, the latter of which operates the world’s largest sovereign wealth fund, worth US$1.19 trillion. Estonia, meanwhile, has “digitised” its economy, he said.
Mongolia still relies mostly on minerals for export and China bought US$6.89 billion worth last year, said Derek He, senior analyst with financial market data provider Refinitiv.
Around 95 per cent of Mongolian exports are transported to China, which became the world’s largest manufacturer by output after its accession to the World Trade Organization in 2001. Mongolia’s exports to China were worth US$5.4 billion in 2020, according to Enkhbayar.
Mongolia created its Ministry of Economic Development in January to oversee foreign investment and steer it toward specific projects, said Enkhbayar, who sits on a committee for innovation and digital development plus another for culture.
Mongolia and China signed a series of “cooperation documents’’ earlier this month after Chinese Foreign Minister Wang Yi visited his counterpart Battsetseg Batmunkh in Ulaanbaatar. The two sides agreed to connect railways to highways and reopen border crossings.
Developing infrastructure in Mongolia will help China “diversify its sources of mineral imports and strengthen trade ties with Mongolia,” He said.
Cross-border railway links and transport upgrades are “very good news” for Mongolia’s non-mining sectors, Enkhbayar added. Technology infrastructure investments from China could follow, he said.
The Mongolian politician is particularly keen to see more Chinese capital flow into renewable energy, which could displace pollution-heavy energy sources now used in mining.
China could also play a bigger part in Mongolia’s 31-year-old capital markets, as the People’s Bank of China and the Bank of Mongolia have a currency swap agreement, Enkhbayar said.
Connections between China’s US$1 trillion Belt and Road Initiative, which was set up to facilitate trade by building cross-border infrastructure, and Mongolia’s like-minded Steppe Road Plan could allow for more upgrades, Enkhbayar said.
Wang said during his visit to Mongolia that China “stands ready to foster greater synergy of development strategies with the Mongolian side”.
The two countries should “support each other in accelerating development and rejuvenation”, Wang was quoted as saying on the Chinese foreign ministry’s website.
By Ralph Jennings
Ralph Jennings joined the Politcal Economy desk as a Senior Reporter in August 2022 having worked as a freelancer since 2011. Ralph previously worked for Thomson Reuters in Taipei and for local newspapers in California. He graduated from University of California, Berkeley with a bachelor’s degree in mass communication.
Published Date:2022-08-31
