Abstract

This paper analyzes the background and process of economic cooperation between Mongolia and China, which focuses on establishment of social overhead capital and energy supply facilities, Mongolian coal exports to China. It is based on analyses of government policy documents and related literature. Mongolia and China collaborated construction of internal road network in Mongolia, and transport network connecting from Mongolia to Northern China and Russia. The internal network in Mongolia sought to connect from Ulaanbaatar to neighboring regions, Erlianhaote and Ganchimaodu. The immediate benefit for Mongolia was the injection of much needed capital, skilled manpower and technology from China, all of which Mongolia lacked. Beyond this, Mongolia stood to gain from social overhead capital projects and energy supply facilities, as well as alleviate difficulties in the domestic transportation. Externally, the expansion of Mongolia’s transport network aimed to increase coal exports to China. In addition, Shenhua Group and Chinese central government are trying to increase exports of Mongolian coal to China by expanding the railway network connecting the Chinese border with the Tavan tolgoy coal mine.BRHowever, Mongolia has some difficulties in the process of cooperation with China. The downswing for Mongolia‘s role in the process of domestic road network construction was that all the work was done by Chinese companies, because Mongolian firms did not meet the selection criteria set by the Asia Development Bank and the European Bank for Reconstruction and Development. Accordingly, Mongolian local companies had a difficulty in participating in its own social overhead capital construction projects which gave fund from multilateral development banks. Additionally, Mongolia’s dependence on China intensified, as experienced Chinese companies took charge of all of these construction projects. To protect their trust, the Chinese companies completed their assignments on schedule. Their performance, however, did not transfer the technical skills to Mongolian workers, including training in construction technology, and operating of technical equipment. Furthermore, the expansion of the railway network connecting Mongolia, China and Russia was expected to delay, pending economic feasibility studies and verification. Despite these challenges, Mongolia was expected to continue cooperating with China, to ease difficulties in domestic transportation, stabilize energy supply and increase coal exports to mainland China.

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