How did Mongolia’s business community view the state visit by Xi Jinping, the President of China?

By B.Zulbayar

The article was published online on UB Post, a Mongolia's national English newspaper on 2nd of September 2014 and the hard copy of the newspaper was distributed on 3rd September 2014, in Mongolia. http://ubpost.mongolnews.mn/?p=11753

  

August has been a very busy month for Mongolia with a number of high profile delegations from abroad, marking the 75^th anniversary of the Khalhiin Gol victory, and, more importantly, the historic two-day state visit by President Xi Jinping of China.

The state visit, which occurred on the 65^th anniversary of establishment of diplomatic relations between China and Mongolia, saw the Presidents of both countries issuing a "Joint Declaration” between China and Mongolia for establishing and developing a comprehensive strategic partnership, followed by the signing of a series of bilateral cooperation agreements in fields such as diplomacy, the economy, transportation, mineral products, infrastructure construction, finance, culture.

Most of them were of the utmost importance for improving the conditions in Mongolia which are causing its current economic slow-down. To be more specific, during the state visit the two countries reached an agreement that China is to give Mongolia better access to its ports and railways, in addition to setting a target of boosting annual trade between the two countries to US$10 billion by 2020, up from just over US$6 billion currently.  

In 2013, trade with China accounted for 52% of Mongolia’s total foreign trade according to statistics from the Customs General Administration of Mongolia. Whereas, 2014 Mongolia Investment Climate Statements by the U.S. Embassy in Mongolia reveal that 26% of total Foreign Direct Investments in Mongolia to date are from China.

Major benefits stemming from President Xi’s visit for Mongolian businesses       and for Mongolia’s economy: ·                  Currency Swap agreement worth CNY 15 billion between central banks; ·                   Cooperation for building a Coal to Gas Plant worth USD 30 billion; ·                     Initiatives on Railway and Transit Transportation between Mongolia and China; ·                      Mutual Agreement on use of eight seaports in China for Mongolia’s                international trade; ·                      MoU on establishing a Free Trade Zone between China and Mongolia; ·                      MoU on cooperation for Mongolian Petroleum Authority and              Chinese Petroleum Authority

 

 During and after President Xi’s visit, there were a number of interviews and analysis in Mongolian media by business people and commentators who expressed their opinions and expectations about the outcome and the importance of the State visit. For example, two representatives of Mongolia’s business community, U. Ganzorig, the President of Mongolian Financial Markets Association, and B.Dulguun, Executive Director of Tenger Capital LLC, a securities brokerage firm in Mongolia, were interviewed by Eagle TV, one of the major televisions in Mongolia. During the interview they brought up some interesting points regarding the State visit.

In the interview, Mr. Ganzorig said that “the visit has clearly sent a message to the world that Mongolia is not dependent upon a single company called Rio Tinto and the country can continue to work with China in many ways”. He also highlighted the importance of signing an official agreement to facilitate a currency swap agreement between Mongolian and Chinese central banks. Mr. Ganzorig further cited Chinese support on the cross-border transit transportation issue which will allow Mongolia to overcome its landlocked country status and enable it to more effectively trade globally.

In Mr. Dulguun’s view, President Xi’s visit was very significant for Mongolia at a time of current economic slowdown in the country. Also, Mr. Dulguun added that China consumes 25% of all the steel and 70% of all cement production globally. Therefore, if Mongolia takes this opportunity to produce these construction materials itself, there will be a huge market for these Mongolian produced construction materials in China.

The favorable transit transportation deal with China opens the door for Mongolia to reach out to international consumers. In return, China may use Mongolian railways to deliver its goods to European markets at favorable transportation costs via faster routes through politically stable territories compared to routes through the Central Asian region. Simply put, there will be fewer difficulties for Chinese and Mongolian businesses to sort out in relation to transportation issues in each other’s territory.

In his recent article in a national daily newspaper, D.Jargalsaikhan, a prominent economist and TV show host, summarized President Xi’s visit and underlined Mr. Xi’s speech at in front of the Mongolian Parliament with respect to both sides’ promises to implement the bilateral cooperation agreements between the two countries. Moreover, Mr. Jargalsaikhan highlighted some points from Mr. Xi’s speech where in the President reassured the parliament that China would always respect Mongolia’s chosen development model and would keep cooperating in every possible way for further nurturing a mutually beneficial relationship based on “win-win” principle between Mongolia and China.

Prior to Mr. Jargalsaikhan’s article in the newspaper, www.ikon.mn revealed a viewpoint by Mr. B. Batbayar, a retired politician and democratic ideologist known as Baabar, in which he emphasized the Chinese pledge of respecting Mongolia’s chosen development model. In addition, Mr. Baabar was confident that a pledge made by the President of China to buy Mongolian produced goods would definitely garner the attention of international investors and improve the outlook of those investors regarding Mongolia. However, Mr. Baabar noted, “How Mongolia prospers will be dependent upon on whether Mongolians can grasp this opportunity and take advantage of it”.

All in all, the state visit of the President of China has been viewed positively by Mongolians at large and the historically-based attitude of distrust and caution for each other have been put aside and replaced by the endeavors of both countries to seek and create mutually beneficial business opportunities.    Hence, there is a lot of optimism and hope in the air for Mongolia’s business community regarding doing business with China now and in the future.

Zulbayar Badral works for Lehman Bush LLC which is a consultancy firm providing business consultancy, market intelligence, and corporate services. Lehman Bush LLC has affiliate offices in Beijing, Shanghai, Hong Kong and Houston, USA. For more information, please visit. www.lehmanbush.mn. You can reach Mr. Zulbayar through Zbadral@lehmanbush.com and follow him via @ZulbayarB on Twitter