Xi Upgrades Mongolia Relationship as Bilateral Trade Grows

China upgraded its ties with Mongolia to the level of “a comprehensive strategic partnership,” which covers political and security cooperation.

Visiting Chinese President Xi Jinping and his Mongolian counterpart, Tsakhia Elbegdorj, signed a joint declaration yesterday in which China said it supports Mongolia’s proposal to hold a tri-lateral summit with Russia that would “further strengthen cooperation among the three neighbors,” according to the official Xinhua News Agency. Russian President Vladimir Putin will visit soon, according to the Mongolian Foreign Ministry.

Mongolia’s southern neighbor has been its largest trading partner and biggest source of foreign investment for more than a decade. Mongolia, sandwiched between China and Russia, is seeking closer ties to take advantage of Chinese investment, while Xi wants more support from his neighbors at international forums as he pursues increased influence in regional affairs.

“The old Soviet legacy that could sustain ties between Russia and Mongolia is still palpable, but economically Ulaanbaatar relies on Beijing more than anybody else,” said Cheng Yijun, senior researcher with the Institute of Russian, Eastern European, Central Asian Studies at the Chinese Academy of Social Sciences. “Mongolia wants to utilize both factors and has no intention to offend either.”

China pledged to help Mongolia join the Asia-Pacific Economic Cooperation mechanism and play an active role in East Asian security cooperation. Xi invited Elbegdorj to attend a meeting among China’s partners on the sidelines of APEC, due to be held in Beijing in November. China and Mongolia will set up a strategic dialogue mechanism between their foreign ministers and initiate mutual visits in their defense sectors.

“Third Neighbor”

Mongolia, once part of China’s empire and later a de-facto Soviet satellite, has been seeking to develop a more balanced strategy it calls the “third neighbor” foreign policy. It entails a plan to boost engagement with its virtual neighbors -- those beyond China and Russia -- including the U.S., the EU, other Asia-Pacific countries and various international organizations.

“The ‘third neighbor’ approach complicates the trilateral relations between Mongolia, China and Russia, but it also gives Beijing an opportunity to pull Mongolia closer to its pursuit of greater regional clout and win more support in international affairs,” Cheng from CASS said.

The joint declaration said the two countries will strengthen cooperation in events sponsored by the United Nations, the Asia-Europe summit, the Shanghai Cooperation Organization and the Conference on the Interaction and Confidence Building Measures in Asia. The last one is a new security platform Xi proposed at a regional summit in May.

Dalai Lama

Mongolia canceled a visit by Tibetan spiritual leader the Dalai Lama, which was originally scheduled for late August, according to the Hong Kong Chinese newspaper Takung Pao. The joint declaration says China appreciates Mongolia’s “correct stand” on issues related to Tibet, Taiwan and Xinjiang, and emphasizes that neither country will conduct or participate in any activity that will impair the other’s sovereignty, security and territorial integrity.

Xi’s visit is the first in 11 years by a Chinese head of state to Mongolia, Xinhua reported, and only his second single-country state visit since he became president in March 2013.

The two countries established “a partnership of mutual trust” in 2003 and elevated the ties to “a strategic partnership” in 2011. The latest upgrade reflects both sides’ intention to push the ties “on to a fast track,” according to the joint declaration.

Chinese Investment

On the economic front, China agreed to offer sea ports and railway transport access to Mongolia and help finance a number of projects in medical care, education, railroad and residential community construction, according to Xinhua.

China and Mongolia also inked a memorandum of understanding on setting up a bilateral free-trade zone and a deal on currency swaps. Thursday’s declaration set a bilateral trade target of $10 billion by 2020, from $6.2 billion last year, according to data by Bloomberg.

Mongolia said it stands ready to join the Silk Road Economic Belt initiative, which was first proposed by Xi in September, and also the construction of an Asian infrastructure investment bank as a founding member.

The agreements will “inject fresh impetus” into trade between China and Mongolia, Xi was quoted as saying by Xinhua.

To contact the reporter on this story: Ting Shi in Hong Kong at tshi31@bloomberg.net

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net Malcolm Scott, Andrew Davis

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