The dilemma of Mongolia on Chinese investment
Mongolia is not a hot word in Chinese economic news, but has a vital position for frontier investors. But now, it seems that Mongolia’s government wants to think more about Chinese investment.
According to Nisha Gopalan, author of “Mongolia wary of Chinese investment”, China has gained a lot benefits from the resource-rich country, especially the state-owned giant Aluminum Corp. of China Ltd. (NYSE:ACH, 2600.HK, 601600.SH, ), also known as Chalco. Chalco has made large investments in the country, taking 80% of production from Tavan Tolgoi, a giant coking-coal project that Mongolia plans to list in a$10 billion IPO in London, Hong Kong and Ulan Bator and spending more than$300 million for a stake in a trading firm that dominates the import of Mongolia coal into China.
But the recent investment for Chalco in Mongolia doesn’t go smooth. Its bid of almost $1 billion for a majority stake in SouthGobi Resources has been suspended by China-wary Mongolian officials. Nisha Gopalan explains that it is a political move ahead of the country’s June elections. Mongolia’s parliament is thinking about limiting the export of a strategic resource to a foreign state body.
However, Mongolia doesn’t have more choices in picking a trade partner. As a landlocked country, it faces difficulties in supplying its goods to the rest world across the Pacific Ocean. Its neighbor, Russia, boasts its own raw materials. And it looks little beneficial to export Mongolian commodities through vast Siberia to the sea. As its neighbor, China is the largest user of resource in the world and the best trade partner. Although benefiting a lot from foreign investment, mainly China, Mongolia still doesn’t want to give much more to its powerful neighbor.
According to Nisha Gopalan, author of “Mongolia wary of Chinese investment”, China has gained a lot benefits from the resource-rich country, especially the state-owned giant Aluminum Corp. of China Ltd. (NYSE:ACH, 2600.HK, 601600.SH, ), also known as Chalco. Chalco has made large investments in the country, taking 80% of production from Tavan Tolgoi, a giant coking-coal project that Mongolia plans to list in a$10 billion IPO in London, Hong Kong and Ulan Bator and spending more than$300 million for a stake in a trading firm that dominates the import of Mongolia coal into China.
But the recent investment for Chalco in Mongolia doesn’t go smooth. Its bid of almost $1 billion for a majority stake in SouthGobi Resources has been suspended by China-wary Mongolian officials. Nisha Gopalan explains that it is a political move ahead of the country’s June elections. Mongolia’s parliament is thinking about limiting the export of a strategic resource to a foreign state body.
However, Mongolia doesn’t have more choices in picking a trade partner. As a landlocked country, it faces difficulties in supplying its goods to the rest world across the Pacific Ocean. Its neighbor, Russia, boasts its own raw materials. And it looks little beneficial to export Mongolian commodities through vast Siberia to the sea. As its neighbor, China is the largest user of resource in the world and the best trade partner. Although benefiting a lot from foreign investment, mainly China, Mongolia still doesn’t want to give much more to its powerful neighbor.
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