Foreign economic relations of Mongolia: Changing a key partner

Abstract

The author overviews the dynamics and structure of Mongolia's foreign economic relations for the period 1996-2015. It is shown that the growth of external trade was not accompanied by a significant expansion of its geographic structure which remains poorly diversified. In 2015 top five trade partners accounted for 96% of total Mongolian merchandise exports and 80% of its imports. The key trading partners of Mongolia are China and Russia. At the end of 1990s Russia lost its leading status in the trade and investment relationship with Mongolia. Its position in foreign trade was occupied by China and in investment - by Hong Kong and China (in 2012 they were replaced by the Netherlands). For 20 years the value of Mongolian exports to Russia fell by 3.5 times, while the Russia's share in total Mongolian exports - from 63 to 2%. Commodity structure of Mongolian exports to Russia also changed. In 1996 the main position was copper ore, in 2015 - fluorspar. However, Mongolian imports from Russia had different trends: for 20 years its volume increased by 6.2 times, while the share of Russia fell from 36 to 27%. Commodity structure didn't change significantly: both in 1996 and 2015 the main position was oil and oil products. During the study period Mongolian exports to China grew by 51.3 times. Its commodity structure changed dramatically as well as in the Russian case. In 1996 the main position was sheepskin and wool, in 2015 - copper ore and its concentrates. At the same time Mongolian imports from China grew by 19.6 times and China's share in total Mongolian imports - from 16% to 36%. Commodity structure of imports also changed. So, in 1996 the key position was wheat flour and in 2015 it changed to the equipment for sorting, washing and other processing of mineral products. Thus, for 20 years China has changed the trading model with Mongolia: now instead of flour it supplies equipment to the Mongolian market, while Russia continues to exchange raw materials for raw materials. Although the key trading partners of Mongolia are its "natural" trading partners, the country needs to expand the geographical structure of its foreign economic relations, as the high dependence on China and Russia is becoming a threat to Mongolian foreign economic security.