China- Mongolia economic cooperation valuable to maintain regional stability

Can China play a role to help ease Mongolia’s economic crisis?

Observers are currently speculating if Mongolia is set to be the next nation to follow Venezuela to the verge of economic collapse, as the currency of the miningdependent country is in free fall and there are rumors that the state can’t pay the salaries of its national athletes. Possible chaos in the Chinese neighborhood is undoubtedly contrary to China’s interests.

China may need to consider approving a financial bailout for Mongolia to help the country address its problems in economic and social development.

Reuters said Wednesday that Mongolia’s budget deficit stands at 20.6 percent of GDP, far higher than was previously thought. Now Mongolia’s top priority will be to take concrete measures to reduce its budget deficit and prevent financial risks from further expanding.

China has a long- standing friendship with Mongolia and has repeatedly offered loans and free aid to the Asian neighbor. Considering Mongolia is a key nation in the One Belt and One Road initiative, now would be a good time for China to strengthen cooperation with Mongolia in fields such as infrastructure, energy and minerals by providing additional preferential loans and financial assistance, which would likely help reduce Mongolia’s budget deficit.

China’s oil- for- loans deal with Venezuela, which gives the South American country’s crisis- hit economy a break, has received an increasing amount of attention from the world. At a time when international investors are cautious about providing support for the nation, China appears to be one of the last sources of assistance for Venezuela. To some extent, a similar resource- for- loans deal can be used between China and Mongolia.

Financial assistance from China would help in the fight against Mongolia’s economic crisis, but a full recovery requires more effort from Mongolia to ensure the stable and sound development of its financial system. Reuters reported Tuesday that Mongolians had begun to scrabble for US dollars and Chinese yuan after the local currency has plunged in recent weeks. In this regard, Mongolia may need to consider enhancing its financial cooperation with China and seek to expand the currencyswap scale between the yuan and Mongolia’s tugrik.

What landed Mongolia in its current economic crisis are a number of factors including an unfriendly attitude toward foreign investment. Now that investors from other countries have reportedly started yanking funds out of the country, Mongolia may not have many options, other than China, to work with. In this regard, China- Mongolia economic cooperation will be valuable to maintain regional stability.