China’s northern neighbor has the potential to help reduce US and global reliance on Beijing’s critical minerals.
China’s rocky relationship with Taiwan frequently sparks headlines, but its bond with Mongolia hardly ever does. Beijing, however, does not view Mongolia as just another neighbor. 

In his diaries from a 1974–1975 posting in Beijing, George HW Bush—then chief of the US Liaison Office in China—recalled a stunning admission from Deng Xiaoping. On the topic of Mongolia, which had been part of the Qing Dynasty territory prior to Mongolian independence in 1911, Deng complained to Bush that Mongolia had been “unfairly” taken away from China by Russia. Deng added that, while China would not attempt to retake Mongolia in the near-term, the situation could be different “in a hundred years.” 

Half a century has passed since Deng’s remark, and while much attention is paid to Beijing’s remonstrances regarding Taiwan—and rightly so—the Chinese Communist Party (CCP) holds similarly expansionist positions regarding Mongolia. 

The China-Mongolia question is not merely a historical curiosity or a matter of Inner Asian affairs; it is highly relevant to another facet of US-China competition: the need to develop supply chain alternatives to China’s current monopoly on rare-earth production and exports. 

In recent years, Chinese restrictions on rare-earth exports and near-complete control of rare-earth refining capacity have forced the United States and EU countries to develop alternative sources of supply and refinement rapidly. In this process, the opportunity for the United States to cooperate with Mongolia to develop and export Mongolia’s rare-earth reserves has been overlooked. 

China continues to aggressively seek control over Mongolia, not only for the neo-colonial reasons mentioned above, but also to further solidify its chokehold on global rare-earth supply chains by integrating Mongolia’s vast reserves into its extractive arsenal. 

Mongolia, a sparsely populated nation of 3.5 million people, sandwiched between Russia and China, is estimated to hold about 17 percent of world reserves, second only to China’s 24 percent share. In June 2023, Mongolia and the United States signed a Memorandum of Understanding in which both sides “agreed to advance secure and resilient critical mineral supply chains in the Indo-Pacific region.” 

One month before the agreement was signed, French President Emmanuel Macron visited Mongolia. Part of his visit focused on enhancing cooperation between Orano, a French nuclear company, and MonAtom, Mongolia’s state-owned nuclear enterprise, regarding the Zuuvch Ovoo uranium mine in southern Mongolia. In January 2025, Orano and MonAtom reached an agreement to develop Zuuvch Ovoo jointly. 

France has clearly recognized the value of joint mineral exploration in Mongolia. The time has come for the United States to do the same, based on the following principles:

First, Mongolia and the United States share a joint commitment to constitutional governance, democracy, and freedom of speech.

Second, Mongolia holds a large share of the world’s rare-earth reserves and would greatly benefit from their development.

Third, the United States maintains a strategic interest in sourcing refined rare-earth elements from countries not identified as nations of concern. 

Based on these principles, the United States and Mongolia should consider the following avenues of cooperation:

1. Joint development of rare-earth deposits in Mongolia involving an American-Mongolian consortium of companies. 

2. Development Finance Corporation (DFC) financing of rare-earth refining capacity in Mongolia, in concert with the French, South Korean, and other countries with relevant capabilities.

3. DFC partial financing of a nuclear power plant in Mongolia, solving long-term issues with the capital, Ulaanbaatar’s, power supply, and divesting Mongolian energy supply away from Russia and China.

4. DFC financing of American-made agricultural equipment sales to Mongolia, as American agricultural equipment is best-in-class and highly sought after in Mongolia. Further sales would strengthen Mongolian food security while supporting America’s productive economy. 

5. Department of State authorization of Farmer-in-Residence and Rancher-in-Residence positions at the US Embassy in Ulaanbaatar, to provide expert technical advice to the Mongolian agricultural sector and build on shared cultural traditions of horsemanship.

For cooperation to be lasting and effective, Mongolia must ensure that American investors are protected and not subject to arbitrary regulations. At the same time, the use of DFC financing, given its clear sponsorship from the US government, will help to deter regulatory irregularities.

However, the largest obstacle to effective and realistic US-Mongolia engagement is China’s attempt to reduce Mongolia to a vassal state entirely reliant on the People’s Republic of China. China’s neo-colonial approach to Mongolia is causing concern among foreign investors in Mongolia’s rare-earth sector. Since shipping Mongolian products through China is the most cost-effective, China’s unpredictable policies could delay or seize rare-earth shipments destined for countries such as the United States or Japan. 

To counteract potential anti-trade measures from China, multinational, coalition-based financing and extraction efforts ought to be utilized. Indeed, China has demonstrated a clear appetite for imposing punitive measures on American companies seeking to develop alternative supply chains outside China-dominated industries, such as the rare-earth industry. 

However, China is far less likely to inflict such punitive measures if rare-earth development projects are organized at the multilateral level. While Beijing pulls no punches when criticizing or inflicting punitive measures on the United States, it is less likely to engage in disruptive activity if countries such as South Korea or France are involved. 

To prevent yet another democratic, America-aligned ally from falling further into China’s grip, the US and its partners must pool readily available institutional resources with a sense of urgency. After all, there is much to be gained in the process.

About the Author: Edward Owen
Edward Owen is a senior policy analyst in the Asian Studies Center at the Heritage Foundation. His work analyzes Chinese activity in Southeast Asia and Latin America. Before joining Heritage, Owen worked as a director at Baron Public Affairs, a political risk consultancy. At Baron, he supported consulting projects for private-sector clients and the US Department of War, providing insight into PLA strategy, CCP bureaucracy, regulatory culture, and global Chinese commercial networks. His role at Baron saw him travel extensively across Southeast Asia, including Thailand, Malaysia, and the Philippines. Hollins Randolph, a former member of Heritage’s Young Leaders Program, contributed to this article.

Published Date:2026-05-26