China has the capacity to lift Mongolia out of its current crisis and improve its economy under the condition that Mongolia intensifies its involvement in the One Belt One Road Initiative, says the Chinese state-run newspaper Global Times.
The Global Times is largely thought of as the informal voice of the Chinese government internationally. The newspaper is widely known to release controversial and critical articles that are believed to voice the positions of the Chinese Communist Party through an alternative channel.
The newspaper has been critical of Mongolia in the past, especially surrounding the recent Dalai Lama visit. This time, however, the newspaper proposed that enhancing economic cooperation with China could help Mongolia with its “financial impasse and reverse its slow growth.”
The article reminded readers about the 580 million USD bond debt due in March and mentioned about the charity fund established for citizens to donate money to help revive the economy. The bond in question was issued by the Development Bank of Mongolia in March 2012, with a tenor of five years and a coupon of 5.75 percent. The bond will mature on March 21.
The government is currently negotiating a bailout with the International Monetary Fund (IMF) and China amid a severe economic crisis in the country, which has dragged down GDP from double-digit growth a few years ago to close to zero.
The Global Times underlined, “Experts said China, Mongolia’s largest trading partner, can play a positive role in helping the crisis-stricken country.
“As of the end of September 2016, Mongolia’s overall debt stood at 23.78 billion USD, up 10 percent from a year earlier and exceeding 210 percent of its GDP, according to a statement posted on January 25 on the website of the economic and commercial counselor’s office of the Chinese Embassy in Mongolia. The statement cited data from Mongolia’s statistical authority and the central bank in the country.”
The article highlighted that a slump in commodity prices, coupled with natural disasters in 2016, caused Mongolia’s GDP growth in 2016 to drop to 1.6 percent.
Sun Huijun, an expert on relationships among China, Russia and Central Asian countries, told the Global Times on Sunday that as China’s neighbor is experiencing hardships, China can prove to be “a friend in need.”
“China can help Mongolia secure low-interest loans from multilateral institutions, or arrange loans after inter-governmental negotiations,” Sun said.
Li Xing, director of the Eurasian Studies Center with the Beijing Normal University, said that China has the capacity to lift Mongolia out of the current crisis and improve its economy, but there is a condition.
“Under China’s proposed One Belt and One Road initiative, there is an economic corridor starting from China, running through Mongolia and onward to Russia. This is a plan drawn up by the Chinese government, and much can be done under the framework,” Li said.
The One Belt and One Road initiative has been at the forefront of Chinese foreign policy as the project which was proposed by President Xi Jinping.
The initiative has many plans involving infrastructure and connectivity, and it can bring lots of money to Mongolia, Li told the Global Times on Sunday.
Sun said prosperous neighbors and partners also suit China’s ambitions to push its One Belt and One Road initiative, against the backdrop of likely uncertainties in world trade brought up by the Trump administration.
“Russia, Kazakhstan and Mongolia are especially important to the northern route of the Silk Road initiative,” noted Sun.
Li said that 580 million USD liquidity is within easy reach for China, “but China has its principles that are non-negotiable.” Li noted that the visit by the Dalai Lama to Mongolia last year hurt bilateral relations.
Analysts have noted that this might be the Chinese government’s way of expressing its openness to helping the Mongolian economy revive, more specifically helping pay off its bond obligations.