The article examines the influence of the Mongolian national factor on Sino-Mongolian relations, as well as its repercussion in PRC domestic policy, primarily in the Autonomous Region of Inner Mongolia. Particular attention is paid to ethno-cultural reasons and conditions that hinder the stable development of bilateral relations between China and Mongolia: the existence of world pan-Mongolian and nationalist movements, the dispute over the status of the XIV Dalai Lama, China's actions to appropriate the symbols of traditional Mongolian culture and the commercialization of Genghis Khan's personality. In the study of Beijing's national policy in Inner Mongolia, the historical prerequisites that served to complicate the Mongolian issue in the modern PRC were identified, and the features of the policy of forming the "consciousness of the community of the Chinese nation" in relation to the IMAR were discovered. Special attention is paid to Beijing's attempts to acculturate the Mongols living in the PRC by translating educational programs from Mongolian into Chinese, regulating the rituals of Buddhism, and appropriating common Mongolian intangible cultural heritage sites to China.Separately, the growing economic interaction between China and Mongolia, which results in China's leading position in the foreign trade turnover of Mongolia and in foreign investment in the country's enterprises, is considered. The Beijing's sanctions pressure on Ulaanbaatar is analyzed in connection with disagreements on national and religious grounds, as a result of which the Mongolian leadership made concessions to the PRC. The study concludes that, from a rational viewpoint, it is beneficial for China and Mongolia to maintain a stable and predictable bilateral political and economic interaction. At the same time, the Mongolian national factor forces both states to treat each other with a certain degree of apprehension. Beijing sees Mongolia as a country bearing the threat of pan-Mongolian separatism, and Ulaanbaatar, based on the historically established Sinophobic mentality of the Mongols, is afraid of falling into total economic and cultural dependence on the PRC.