Landlocked Mongolia is hoping to secure better access to Chinese ports as President Xi Jinping becomes the first Chinese head of state in more than a decade to visit this sprawling resource-rich nation sandwiched between China and Russia.
Xi arrived in the Mongolian capital on Thursday and was to meet with Mongolian President Elbegdorj Tsakhia later in the day. He also plans to meet on Friday with Prime Minister Altankhuyag Norov, who is chairman of Elbegdorj's ruling Democratic Party, and deliver a speech at the Great Hural, Mongolia's parliament.
Faced with declining foreign investment and increased inflation and unemployment, Mongolia is desperate for more routes to export its mineral resources. Xi's trip to Mongolia — the first by a Chinese president in 11 years — is expected to include discussions on infrastructure investment, as well deals to help Mongolia export minerals through Chinese ports including Tianjin and Dalian.
Four of 11 agreements under discussion have to do with ground transportation to Chinese ports, to better ship high-value minerals to South Korea and Japan, China expert Munkhtuul Banzragch said.
Mongolia is building a railway from one of its largest coking coal deposits to the Chinese border. Still undecided is the much-debated issue of whether to stay with Mongolia's wide-gauge rail inherited from its time as a Soviet client state, or shift to a narrower gauge used in China.
Xi will oversee the signing of 20 cooperative agreements covering mineral extraction, infrastructure building, finance and diplomatic relations, the official China Daily newspaper said.
With several major mining projects in legal limbo, Western investment in Mongolia has fallen sharply, causing the country to turn increasingly to China and Russia to support its economy, which traditionally relied on animal herding.
China accounts for more than half of the country's external trade and receives almost 90 percent of its exports, mainly copper, coal and animal products, while supplying 37 percent of its imports. Bilateral trade has soared over the past decade, reaching $6 billion last year.
Mongolia relies on Russia for 76 percent of its gasoline and diesel fuel and much of its electricity, making it highly vulnerable to price fluctuations.
A nation of about 3 million people almost the size of Alaska, Mongolia was firmly under Soviet sway during the Cold War and sided with Moscow in its battle with Beijing for leadership of the Communist bloc.
In the 1990s, after the collapse of the Soviet empire and loss of subsidies from Moscow, Mongolia transitioned into a democracy and a market economy and adopted a "third neighbor" policy to court nations like the United States and Japan and reduce its reliance on its two giant neighbors.
Economically, however, China and Russia are more important than ever and Russian President Vladimir Putin is to visit Mongolia in September, just weeks after Xi's trip.