China's Periphery Policy: Implications for Sino-Mongolian Relations

Author(s): SHARAD K. SONI

Source: India Quarterly, Vol. 65, No. 3 (July-September 2009), pp. 251-269
Published by: Sage Publications, Ltd.
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 China's Periphery Policy: Implications for
Sino-Mongolian Relations*
SHARAD K. SONI

Abstract

During the Cold War period China remained concerned with what it perceived at that time as the Soviet activism
in Asia and therefore, disintegration of the erstwhile USSR played a decisive role in the improvement of Chinas
external environment, both in terms of its neighbourhood as well as securing a favourable balance of power in
the Asia-Pacific region. Consequently, changes in the global geopolitical and regional geostrategic environment
surrounding Chinas northern neighbour Mongolia, coupled with the open door policies of both Beijing and
Ulaanbaatar, set the tone for the improvement of their hitherto strained bilateral and multilateral ties. It is in
this context that this article analyses post-Cold War developments in the Chinese policy towards its neighbours
or what it calls as its periphery' countries and its implications for Sino-Mongolian relations, particularly in the
political, economic and strategic realms. It highlights, among other things, that Beijing's neighbourhood policy
as applied to its relations with Mongolia seems to be advantageous, both economically as well as strategically, for
strengthening China's growing role as an Asian power.

* This article is based on a research project undertaken in the People's Republic of China by the author as ASIA Fellow in 2005-06, which
was funded by the Asian Scholarship Foundation, Bangkok (Thailand).

The author is Assistant Professor, Centre for South, Central, Southeast Asian and Southwest Pacific Studies, School of International Studies,
Jawaharlal Nehru University, New Delhi.

INDIA QUARTERLY 65, 3 (2009): 251-69

SAGE Publications: Los Angeles • London • New Delhi • Singapore • Washington DC
DOI: 10.1177/097492840906500303

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252 Sharad K. Soni

Introduction

The study of Chinas foreign relations, particularly with its Asian neighbours often called as periphery countries'
(zhoubian guojia ), has assumed importance in the post-Cold War era, when a comprehensive national build
up' based on the twin goals of security and great-power status emerged as the key element of Beijing's foreign
policy. During the Cold War period China's first and foremost foreign policy concern was the erstwhile Soviet
Union and, therefore, disintegration of the USSR played a decisive role in the improvement of Chinas external
environment, both in terms of its neighbourhood and the favourable balance of power in the Asia- Pacific region.
Whereas politically, China began pursuing multilateral and bilateral diplomacy to convince others of the benefits of
engagement, economically it involved itself in nurturing relations with diverse trading partners to have its forceful
presence in the world. Non-military aspects of security, such as political and economic security have, therefore,
become the prime concern of the Chinese foreign policy. It is more so because security is now no more defined
by a country's self-defence capacity but by its capacity to survive and compete. Chinese leadership has taken this
pragmatic approach by no longer viewing the world from the viewpoint of class struggle, but from the viewpoint
of power politics. As such prosperity and survival have become most important objectives of each state's national
interest that can be achieved by forging mutually beneficial relations with the outside world. This characterises the
Sino-Mongolian relations, particularly in the post-Cold War period.
While Mongolia has been trying to overcome its geographical disadvantage of being a landlocked state and strive
to have its independent existence despite being surrounded by two giant powers, Russia and China, Beijing has
now emerged as Ulaanbaatar's main political and economic partner, thereby giving a boost to Mongolian economy.
Traditionally Mongolia turned to Russia for support against China, giving Moscow a distinct advantage over
Beijing that adversely affected Sino-Mongolian relations. But collapse of the Soviet power in 1991 enabled China to
fill the power vacuum, particularly in economic and strategic realms. With the normalization of relations between
Russia and China, other countries also began to forge their mutually advantageous relations with Mongolia, a
small state having a population of just approximately 2.9 million. But this small state also has the distinction of
being a region of geopolitical importance in the world politics due to its strategic location at the cross-j unction of
Central Asia, North-East Asia, Far East, China and Russia. Significantly, the post-Cold War security environment
of Mongolia calls for bilateral and multilateral cooperation that has become one of the key factors of regional
dynamism in the Asia-Pacific, in which Chinas role has been paramount. As such, after a long period of mistrust
and hostilities, Sino-Mongolian relations have now moved towards confidence building in matters of bilateral and
multilateral concerns.

It is in this context that this article seeks to examine China's periphery' policy and its implications for China's
relations with its immediate neighbour on the northern side, that is, Mongolia, particularly in the political, economic
and trade, as well as, strategic spheres, besides identifying the major obstacles/risk factors and future trends in the
smooth conduct of the overall relationship between the two sides.

Background: Cold War Situation

Although a good starting point to study Sino-Mongolian relations can be traced back to the legacy of Mongol
conquests in the thirteenth century, it was after the establishment of Manchu-Qing dynasty in China in 1644 that

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 China's Periphery Policy 253

the nature of their relationship was defined. The rise of the Manchus gave way to the vigorous Mongol fragmentation
that led to the sharp geographical division of the Mongols. Consequently, what came to the fore was the emergence
of mainly two Mongolias - Outer and Inner - strikingly different from each other. While Inner Mongolia remained
a part of China since 1636, Outer Mongolia (now an Independent State of Mongolia), which came under Manchu
domination in 1691, declared its independence under the influence of Chinese revolution in 1911. But the final
showdown came only after a second revolution in 1921, which paved the way for proclamation of Mongolia as the
Mongolian Peoples Republic. However, in the post- 1921 period Mongolia got drawn into the Soviet orbit, and
ultimately became a major irritant in the Sino-Soviet relations. The state of Sino-Soviet relations determined the
course of Mongolias relations with China, which adversely affected Sino-Mongolian relations. As such, as a pawn
of geopolitics Mongolia could not escape from being embroiled in the Sino-Soviet rivalry and eventually it had to
take the Soviet side in what Clubb has termed the 'Sino-Soviet Cold War (Clubb 1971: 4 66ff).
Until the Cold War period came to an end, for almost seven decades, the former Soviet Union dominated
Mongolias internal and external policies, while on the other side, relations between China and Mongolia became
strained. However, emergence of quite a new equation in the Sino-Mongolian relations owes much to a series of
events in the middle and late 1980s that led to the Sino-Soviet rapprochement following a radical shift in Moscow's
China policy. What was termed as substantial breakthrough in the normalisation of Sino-Soviet relations, came only
after the Soviet leader Mikhail Gorbachev announced his Vladivostok initiative on 28 July 1986, which marked a
significant shift in Moscow's Asia policy in general and China policy in particular. Improvement in relations with
China was the key issue addressed by Gorbachev during his seminal Vladivostok speech and hence, Mongolia too
figured prominently in his overtures.1 For, Gorbachev knew that normalisation of Sino-Soviet relations to a great
extent also depended on improvement in Sino-Mongolian relations. And, therefore, it was necessary to address the
issue of Soviet troops' withdrawal from the Mongolian territory which continued to be a major Chinese security
concern and an impediment to normalisation of both the Sino-Soviet as well as Sino-Mongolian relations. Finally on
2 March 1990, a Soviet-Mongolian Protocol signed in Ulaanbaatar declared the complete withdrawal of Soviet troops
by 1992, which was actually accomplished on 1 5 September 1992. Complete withdrawal of Soviet/ Russian troops
from Mongolia not only marked the removal of a major obstacle to the normalisation of Sino-Mongolian re-
lations but also paved the way for the two sides to define their relationship on quite a new basis in several key areas.

Beginning of New Era: Post-Cold War Dynamism

The collapse of the USSR and the end of the Cold War altered the geopolitical situation of Mongolia, which
encouraged China to consider its future relations with Mongolia in the framework of new geopolitical realities on
the northern side of its border. Herein lay the beginning of a new era in the Sino-Mongolian relations. Mongolia
is now no more dependent on Russia; rather its relations with China have reached a high point.

New Geopolitical Realities

With the end of the Cold War, the world's geopolitical power structures underwent a drastic change and so
occurred the parallel changes in expectations and attitudes toward international relations: Firstly, the collapse of

1 For more on Gorbachevs Vladivostok Initiative, see Soni (2002: 218-21).

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254 Sharad K. Soni

the Soviet Union left the existence of only one superpower - The United States; secondly, although tu
conflict continued, it was limited in scope and geostrategic implications; and thirdly, more open border
globalisation and régionalisation to prosper, with both positive and negative consequences (Cohen 2003
post-Cold War changes in Sino-Mongolian relations too have been a by-product of global geopolitical and
geostrategic changes. And there are historical reasons to see it in that perspective as Mongolia's regional id
underwent a change. A Mongolian historian called his own country 'A puppet republic' whose fate was ma
by its neighbours - Russia and China - for most of the twentieth century.2 Therefore, the post-Cold War
of a multi-pillar foreign policy' and a 'balanced relationship' with regard to its powerful neighbours, emer
the debate among policy planners to find a suitable option that would take into account Mongolia's g
reality and the interests of its neighbours without compromising Mongolia's own sovereignty. However,
also been concerns about Mongolia's search for a Third Neighbour, such as the United States or Japan, w
act as a balancing power vis-à-vis Russia and China (Sun 2000) But growing US interest in Mongolia
Chinese concerns alleging that Washington wants to control both Russia and China through Mongo
2005: 149). China, on the other hand, recognised the importance of normalising its relations with Mongo
when the latter was still perceived as a Soviet 'satellite', serving at the same time as a 'buffer' by protecti
points along the Chinese and Russian borders. Nevertheless, the Soviet collapse made the task easy as it a
an end to Soviet 'encirclement' of China, which was represented by the deployment of huge Soviet forces
sides of China's borders. It also reduced any major security threat to China from its neighbours to the
northwest for the foreseeable future (Faust and Kornberg 1995: 119). Such dramatic changes in the geos
environment surrounding Mongolia, coupled with the open door policies of both China and Mongol
tone for the improvement of their bilateral ties.

Mongolia's Search for Regional Identity

It was in the early 1 990s that Mongolia's search for regional identity came to the forefront because the issue
implications for Mongolia's survival as a sovereign state. During the Cold War period, Mongolia belon
Soviet-led security system that provided important security assurances, including military ones to its cli
like Mongolia and so its identity was linked to that of a Soviet bloc country. Now that the Soviet Union
and Mongolia began facing the security dilemma, Central Asia was identified as the region to which
belonged geographically, historically and culturally (Baabar 1995). But it was Northeast Asia that finally
as the obvious choice for Mongolia's new regional identity. Several arguments can be made in favour of
alignment with Northeast Asia (Olzvoy 1996: 66): Firstly, the Asia-Pacific, of which Northeast Asia is a
was seen to be becoming an extraordinarily important region in the twenty-first century; secondly,
would come strategically under the economic 'umbrella of technologically advanced countries like Chi
South Korea and the United States; thirdly, Mongolia will have comparatively better relations with t
Far East and China's Northeast apart from making its contribution to resolve the North Korean issue by
'engagement' rather than 'isolation'; fourthly, Mongolia's eastern part, which is the repository of countr

2 Baabar (1999: 244). This work is divided into three parts in which 'Book Three' is entitled as 'A Puppet Republic', see pp.

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 China's Periphery Policy 255

resources, can be made readily accessible to the rest of Northeast Asia by road and railway, thus giving Mongolia
another access to the sea perhaps through the River Tumen and lastly, it will give Mongolia the opportunity to
serve as a land bridge between Northeast Asia and Europe.
Nevertheless, Mongolia's national security concerns remained the main reason to establish close links with
Northeast Asia as it would provide the needed bulwark to ensure its political, economic and strategic security.
It is more so because Northeast Asia could serve as a bridge to enter into the larger world, thereby broadening
Mongolia's scope for security cooperation beyond this region. Having identified itself as a Northeast Asian country
Mongolia is now committed to ensure the security of its own existence by strictly observing the policy of not
allowing the use of the country's territory against other states; ensuring its Nuclear-Weapon-Free-Zone status at
the international level and making it an important element of strengthening the country's security by political
means. China, on the other hand, wants to build up its power base in Northeast Asia due to its geostrategic and
geo-economic importance, for in this sub-region of Asia, four of the world's five recognised centres of power - the
United States, Russia, China itself and Japan - meet and interact. But much of China's successes in Northeast Asia
depend on the proper working of Beijing's policy towards its neighbours on bilateral and multilateral issues.

China's Policy towards its Neighbours

One of the key developments in China's national security interests in the post-Cold War period has been Beijing's
realisation to maintain cordial relations with neighbouring countries in the Asia- Pacific region. It is more so because
over-emphasis on one's own security and neglecting others' will only contribute to escalation of military development
in the world (Yong 1999: 43). Obviously, as part of its coherent foreign policy, Beijing developed an integrated
regional policy, known as ' zhoubian zhengce (periphery policy) or ' mulin zhengce (good-neighbouring policy) to
deal with the negative situation, if any, with regard to China's relations with neighbouring countries.3 The idea of
devising such a policy was intended to explore 'the common ground with Asian countries in both economic and
security arenas by conveying the image of a responsible power willing to contribute to stability and cooperation in
the region' (Zhao 2004: 258). Economic motivation, thus, can be regarded as one of the main guiding principles
in China's periphery policy,4 which also called for settling the remaining border disputes peacefully and preventing
alliances of neighbours with what Beijing believed as 'hostile' foreign powers, such as Russia, Japan and the US. In
other words, establishing good relationships with neighbours was intended to provide 'China with a more secure
environment in its periphery as a leverage to increase its influence in world affairs' (Zhao 2004: 259).
As such China's security environment in its periphery witnessed an enormous improvement after it began
implementing the good-neighbouring policy, which indeed resulted in an increased mutual trust between China
and its neighbours. It clearly reminds of the relevance of China's security concept which was described in few
succinct words and produced for the first time in a working paper in 1999: mutual trust, mutual benefit, equality

3 For a detailed discussion and better understanding on Chinas 4 zhoubian zhengce (periphery policy) or 1 mulin zhengce ' (good-neighbouring
policy), see Zhao (2002: 132-37). Also to understand the new trends in Asia that led reform-minded Chinese leaders to focus on periphery
countries, see Ji and Qingguo (1998: 128).
4 The importance of economic diplomacy is being stressed in Chinas overall foreign policy (Fuchang et al. 2002: 195)

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256 Sharad K. Soni

and coordination.5 However, this improvement also owes much to the late-Cold War period of the 1
two significant policy shifts took place. While the first was to abandon ideology as the guidance an
friendly relations with neighbours regardless of their ideologies and political systems,6 the second p
was to change the practice of defining Chinas relations with its neighbours on the basis of the state of
lations either with the former Soviet Union or the United States. One excellent example of the second po
was the normalisation of relations with Mongolia. A major influence on Chinese thinking about its r
the neighbouring region was the souring of Beijing's economic relations with western countries afte
Tiananmen Square incident. Due to sanctions, China was forced to turn its attention to develop poli
economic relations with its neighbours, particularly those sharing common borders.
It, therefore, appears that the post-Cold War changes in Chinas periphery policy resulted, first
establishment of bilateral relations based on the principles of non-interference in each other's affair
needed relief from the potential fear for a small state like Mongolia and secondly, both China and i
communist neighbours had reason to cooperate politically to resolve problems, such as border issue
poisoned relations in the past. In this context Chinese Premier Wen Jiabao's speech entitled 'China's Dev
and Asia's Rejuvenation' delivered at ASEAN Business and Investment Summit on 7 October 2003 is
While elaborating on China's good-neighbouring or good-neighbourliness policy he stated that Beijin
a policy of bringing harmony, security and prosperity to neighbours' and that, bringing prosperity to n
is to step up mutually beneficial cooperation with the neighbouring countries, deepen regional and sub-
cooperation, and vigorously facilitate economic integration in the region, thus achieving common de
with other Asian countries (Yunhua and Shanbao 2004: 4-5).

Reinforcement of Political and Diplomatic Relations

In the post-Cold War era, China's policy towards Mongolia differs much from that of the Mao era, whi
questioned Mongolia's sovereignty. However, since its re-engagement China has constantly pledged
Mongolia's independence and sovereignty. From the Chinese point of view, now that Beijing's strat
pursue its policy of peace, development and cooperation' - an extension of Deng Xiaoping's policy of
development' (Zhang 2004: 342) - there is much scope for maintaining a positive environment of mu
in the Sino-Mongolian political and diplomatic relations. To this end, the level and frequency of ex
visits of several high level dignitaries have contributed much to the Sino-Mongolian rapprochement
following the establishment of a multi-party political system in Mongolia, the first democratically elected M
President, P. Ochirbat, visited China for the Sino-Mongolian Summit, which is termed as a historic
in Mongolia's difficult relationship with China. Positive signs came from Beijing as well when, in 1991,

^ 'China's Position Paper on the New Security Concept', China's Working Paper submitted to the ARF Foreign Ministers
31 July 1999 cited in Zhenqiang (2004: 18). China's adherence to the new security concept featuring mutual trust, mutual bene
and cooperation is aimed at securing a long-term and favourable international and surrounding environment, see Information Offi
State Council of the PRC (2004: 7).
h This policy shift was stated in a Chinese foreign policy history book as one of the five major policy shifts in the 1980s (Peiz
6-7).

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 China's Periphery Policy 257

Chinese President Yang Shankun paid an official visit to Mongolia, it being the first such visit by a Chinese head
of state since Zhou Enlai's in the 1960s. During this visit, the two sides concluded several agreements resulting in
the establishment of direct ties between various ministries, organisations, local areas and private firms of the two
countries (US Department of State 1993).
However, it was in 1994 that the two sides put a seal on their renewed diplomacy and commitment towards
restoration of normalised relations when a new Treaty of Friendship and Cooperation was signed on quite a new
basis during Chinese Premier Li Pengs visit to Mongolia. In fact, the treaty has become the guiding principle for
the future development of Sino-Mongolian relations. It is more so because Article 1 of the Treaty stipulates that
both sides remain committed to 'develop their good neighbourly relations and cooperation on a basis of mutual
respect for each other s independence, sovereignty, and territorial integrity, for the principle of mutual non-attack,
non-interference in internal affairs, for equality of rights, for mutual advantages, and for peaceful co-existence'.7
The years that followed the signing of the 1994 treaty witnessed the continuation of high-level visits, thus
showing commitments towards confidence building for long-term stable relations between the two countries. A
landmark event in the post-Cold War period of Sino-Mongolian relations was marked by a high profile visit of the
Chinese President Jiang Zemin to Mongolia in July 1999. His visit appears to have been a clear sign of making
Chinas presence felt in Mongolia strongly, while at the same time reaffirming the conviction that unlike the
past, China now respects Mongolia's independence and sovereignty and that 'Mongolia's security is not to be viewed
in terms of Chinese threat' (Soni 2005: 234).
On the other side, Mongolia's diplomatic initiative found its further expression when Prime Minister N.
Enkhbayar paid an official visit to China in January 2002. While holding talks with Enkhbayar, the Chinese
Prime Minister Zhu Rongji stressed three points for the development of bilateral ties, that is, 'to continue the ex-
change of visits of high-ranking leaders, to strengthen bilateral cooperation in the fiel .Is of culture and education,
especially among the younger generations of the two countries, and to enhance the cooperation in international
and regional affairs' {Peoples Daily Online 2002). Zhu's viewpoints undoubtedly pointed towards confidence
building for more comprehensive partnership between the two sides. In June 2003, as part of a tour to expand
Beijing's ties with its northern neighbours, Chinese President Hu Jintao, the successor of Jiang Zemin, visited
Mongolia. The fact that Mongolia was included in the itinerary of Hu's first Presidential overseas trip only shows
that the new leadership in China too had adopted a more active attitude towards developing all round friendly
cooperation with Mongolia.
Significantly, in July 2004 Mongolian President N. Bagabandi, the successor of Ochirbat, visited China which
was followed by yet another high level visit in November 2005 by the newly elected President of Mongolia, N.
Enkhbayar, who witnessed the signing of 10 cooperation agreements in the fields of mining, transportation,
energy, infrastructure projects, et cetera, apart from Mongolian acquisition of Chinese preferential export credit
worth US $ 300 million (Jize 2005: 12). Besides, a series of border-related Sino-Mongolian agreements were also
signed, giving Mongolia, for the first time in recent history, a fully-defined national boundary. It is to be noted
that after almost four years of hard work on the border demarcation issue, the entire length of 4,677 km long

7 For the full text of the China-Mongolia 1994 Treaty, see Ministry of Defence of Mongolia (1998: 93-95).

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258 Sharad K. Soni

Sino-Mongolian border was digitally mapped and 1,513 border demarcation posts were installed.8 Fu
November 2006, Mongolian Prime Minister Miegombyn Enkhbold paid an official visit to China and
the signing of several MoUs, including a gift of 2000 tons of wheat from China to Mongolia, coope
tween the foreign ministries of the two countries as well as cooperation on exploration of oil and coal.9
other side, the visit of Chinese Vice President Xi Jinping to Mongolia in June 2008 has been consid
another fruitful high-level visit for boosting bilateral cooperation as the two sides signed the medium-term
for cooperation of trade and economy.' More recently, in April 2009, the visit of the new Mongolian Prim
Sanj Bayar to China provided an opportunity for the two sides to carry on further talks and exchange th
on a wide range of bilateral issues concerning political, economic, trade and cultural cooperation (. Xi
Agency 2009).
As such the frequent exchange of visits by high-level delegations and information shared betwee
countries have been contributing much to the development of their political and diplomatic ties. Such v
aimed at:

1 . Establishing the Sino-Mongolian partnership of good-neighbourliness and mutual trust,

2. Promoting mutually beneficial trade and economic links between the two countries; and
3. Strengthening their cooperation in international and regional affairs to make joint efforts for ma
peace and stability in the region.

So far as implications of Sino-Mongolian relations for Russo-Mongolian relations are concerned,

that Russian interest in Mongolia is now influenced by not only political-strategic concerns but al
economic and trade considerations due to ever-growing Sino-Mongolian economic and trade ties (Bat
Soni 2007: 125). This factor may play a major role in the near future in defining the Si no-Mongolia
trilateral relationship.

Chinese Dominance in Economic and Trade Cooperation

While the Cold War period saw stagnation in Sino-Mongolian economic and trade cooperation, the p
War period has brought an unprecedented growth especially in bilateral trade. China became Mongo
largest trade partner in 1995 and the largest in 1999, when the trade volume between the two sides rea
162 million and 263 million respectively (Table 1). Since then there has been significant growth in the
years. A sharp growth in the volume of trade between the two sides was recorded in 2003, when it reac
440 million, a growth of 21 per cent over 2002. It grew further in 2004 by a record 57.7 per cent to
694 million while in 2005 it reached US $ 860 million, an increase of 24 per cent over the previous year
two years, in 2007, bilateral trade increased by more than 43 per cent to cross the figure of US $ 2 bil
figure accounted for nearly 51 per cent of Mongolia's global trade (Table 2).

s Remarks by H.E. Mr. Nambaryn Enkhbayar, President of Mongolia at the meeting with Foreign Press, Embassy of Mong
30 November 2005.
'' 'Mongolian Prime Minister begins visit to China', accessed on 30 November 2006 at http://www.chinadaily.com.cn/china/
content_740343.htm

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 China's Periphery Policy 259

Table 1: Sino-Mongolian Bilateral Trade, 1987-2007 (Value in US $ min)

China's Exports to China's Imports from Total Value of Bilateral

Year Mongolia Mongolia Trade Trade Balance (d)
I

1987 20.27 4.61 24.88 15.66

1988 16.98 7.95 24.93 9.03
1989 19.86 8.67 28.53 11.19
1990 29.81 11.21 41.02 18.60
1991 25.96 20.07 46.03 5.89
1992 135.76 48.11 183.87 87.65
1993 81.59 69.36 150.95 12.23
1994 42.77 76.10 118.87 (-) 33.33
1995 62.91 99.04 161.95 (-) 36.13
1996 72.36 126.39 198.75 (-) 54.03
1997 63.68 188.25 251.93 (-) 124.57
1998 62.43 180.75 243.18 (-) 118.32
1999 68.83 194.27 263.10 (-) 125.44
2000 110.54 212.07 323.61 (-) 101.53
2001 122.85 239.50 362.35 (-) 116.65
2002 140.03 223.42 363.45 (-) 83.39
2003 155.89 283.95 439.84 (-) 128.06
2004 233.35 461.07 694.42 (-) 227.72
2005 318.98 540.93 859.91 H 221 .95
2006 433.50 1147.48 1580.98 (-) 713.98
2007

Sources: Com
to China's Fo
to 2006; Zho
from 1994 t

Chinas share
than doubled
cent in 1993
with 58.9 per
countries (1 1
being ahead
(6.1 per cent)
China was de
total volume
(9.0 per cent).
second only t
cent). With M
Mongolia's ex

India

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260 Sharad K. Soni

Table 2: Share of China and Mongolia in their Respective Global Trade (Value in US$ m

China's Share in
Mongolia's Share in Mongolia's Global Mongolia's Global
Year

1990 115440 0.04 n/a 2.0

1995 280860 0.06 895.0 15.7
1996 289880 0.07 875.0 n/a
1997 325160 0.08 910.0 n/a
1998 323950 0.08 795.0 19.0
1999 360630 0.07 765.0 29.5
2000 474290 0.07 n/a 34.8
2001 509650 0.07 n/a 30.3
2002 620770 0.06 1214.8 31.95
2003 850990 0.05 1416.9 34.10
2004 1154550 0.06 1890.8 35.49
2005 1422120 0.06 2249.2 36.52
2006 1760396 0.09 3028.4 48.38

2007

Sources: Co
Yearbook
Mongol U
turnover
gov.cn/aa

More or le
amounted t
the EU (18.1
remained u
there has b
largest trad
two sides.

Chinas imports from Mongolia have traditionally consisted mostly of raw materials of livestock origin, which
account for about 80-90 per cent of Mongolia's total exports to China. However, in 1999, China also became
Mongolia's main consumer of copper and copper concentrate for the first time. Nearly 94 per cent of Mongolia's
copper concentrate, 100 per cent of its molybdenum concentrate, most of its raw cashmere, skin and hides and
49.5 per cent of its processed cashmere are being imported by China (Galsandorj and Bud 2001: 184). This
factor contributed to the dramatic growth in China's imports from Mongolia in 2004, when an increase of almost

10 The World Banks Mongolia Monthly Economic Update , July 2009, p. 10.
11 These countries account for the vast majority of Mongolia's exports, that is, 98 per cent of exports in the first half of 2009. In the cases
of EU and Canada, the exports figure fell mostly due to the fact that no gold exports were recorded in June, see ibid.
12 See Zhang (2005).

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 China's Periphery Policy 261

40 per cent on the previous year was seen (Table 1). Chinas exports to Mongolia consist mostly of foodstuffs,
consumer goods and construction materials (Mongolian General Customs Administration 2004: 26-27), while its
imports from Mongolia include copper-molybdenum fine powder, combing wool and lambskin (Mongolia-Web
2008). As per the data in Table 1, from 1987 to 1993 Mongolia had a favourable balance of trade with China,
but thereafter China seems to have started dominating the bilateral trade. Evidently, in 2007, China imported
goods from Mongolia worth US $ 1351.65 million against exports of US $ 682.95 million. Therefore, the trade
gap between the two countries stands at US $ 668.70 million as against 33.33 million in 1994 when for the first
time trade imbalance between the two sides was recorded (Table 1). It is now estimated that the two countries
carry out nearly US $ 3 billion of annual bilateral trade which has been doubled since 2006. Significantly, since
1989 when there was hardly any trade between China and Mongolia, Beijing has been able to fill in Mongolia's
economic vacuum created by the Soviet collapse, though it is also an indicative of 'Beijing's gradual re-assimilation
of Mongolia (Elleman and Paine 2001).
Although Mongolia's main trading partners in China are the local traders from Inner Mongolia, there are traders
from the coastal and southern regions of China as well, including Shandong, Guangdong and Fujian who have been
taking part in the border trade with Mongolia since 1994. In terms of geopolitical importance, Inner Mongolia
Autonomous Region, the first national minority autonomous region in Chinese history, occupies 3,193 km,
that is, 70 per cent of the borderland area of the 4,677 km, long Sino-Mongolian border. With its 1 5 banners
( boshuns ) sharing common borders with Mongolia and having five trading ports of first and second-class categories,
Inner Mongolia plays a sort of bridge between China and Mongolia. Despite the fact that the Mongols in Inner
Mongolia and Mongolia are living in two different countries, ethnically they belong to one group sharing same
language (at least spoken), culture and the lifestyle (Tumenceceg 2002: 98). This factor has contributed much to
the development of the Sino-Mongolian border trade, as the central government in China has been exploiting all
possible resources in Inner Mongolia in order to keep its foothold in Mongolia.
Significantly, since the first Sino-Mongolian border trade agreement was signed in November 1985 followed
by the signing of another agreement in 1990 on border areas emigration control points and their administrative
system, there has been dramatic growth in the Sino-Mongolian border trade. Among the ten pairs of border posts,
which have already been opened, Erlianhot (Inner Mongolian city) of China and Zamyn Uud of Mongolia now
remain open throughout the year, the rest nine pairs being seasonal. Erlianhot city has not only become a main
point of goods clearance, processing and manufacturing, trading and logistics but also a platform for exchange
of communications between Chinese and foreign enterprises including Mongolian ones. At present, border trade
is being carried out between China's Inner Mongolia, Xinjiang-Uighur and Ningxia Hui Autonomous Regions,
Hebei and Jilin provinces and Mongolia's related regions and departments. However, Inner Mongolia and Xinjiang
have comparatively larger share in the border trade with Mongolia due to the advantage of their being the direct
border regions of China.
The extent of Mongolia's economic cooperation with China can be gauged from the fact that Chinese investment
in Mongolia over the years has been impressive. China continues to be the biggest investor in Mongolia since
1998. With bilateral trade already booming, Chinese-backed private sector investment increased dramatically. As of
October 2000, a total of 512 Chinese companies made their capital investments in Mongolia with large amounts

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262 Sharad K. Soni

going to animal husbandry, agriculture and service sector. According to another estimate, between
2003, out of 3,042 foreign companies from 73 countries (Nachin 2005: 25), 1,059 Chinese companies
US $ 379.01 million, accounting for 40 per cent of the total foreign investments in Mongolia (Nalin
By the end of 2004, over 1640 Chinese-invested enterprises were registered in Mongolia which made a to
ment of 460 million US dollars, with greatest amount going for the development of mineral resourc
Daily Online 2005). Currently, the combined investment of all the Chinese enterprises operating in
account for about half of the total investment by foreign-owned firms in the country. These Chinese
also provide over 50,000 direct jobs to local people, accounting for 6.25 per cent of Mongolia's labou
Chinas dominance, thus, is clearly visible in Sino-Mongolian economic and trade cooperation.
Nevertheless, due to its geographical disadvantages of being landlocked as well as high transportation
incurs, Mongolia has not been able to attract many foreign investors. However, investor-friendly change
legislation in 1 996 helped develop some interests among foreign investors in mining, particularly gold
the production of which increased seven-fold in 1997 from what remained in 1993 (Mining Office of th
Resources Authority of Mongolia 1999: 5). As regards China, due to its geographical advantages no other
supplier or investor can compete with it in Mongolia. There are three main reasons for this (Kaye 19

1 . Shipping costs to and from Chinas heartland are very low as compared to any other partner. Even for
trade, rail routes from Chinas Tianjin port are five times shorter than the Russian Far Eastern ports
Mongolia used to be dependent earlier;
2. China has an advantage of acquiring Mongolia's resources of timber, minerals and animal produ
change of farm produce, light manufactures and capital goods that can also prove to be benef
Mongolia and
3. China's frontier province of Inner Mongolia provides Beijing with a ready supply of Mongolian
market agents.

Emerging Security and Military Ties

China has tremendously raised its profile in Mongolia, even in the field of defence cooperation, as
that Mongolia's security is not to be viewed in terms of Chinese threat. From the strategic point of view
Mongolia-China Treaty of Friendship and Cooperation was a historic milestone as the two sides agreed n
part in any military-political alliance directed against each other and will not conclude any treaty and
with a third country that may adversely affect the state sovereignty and security of the other party'.1
and China also decided that they will not allow a third country to use its territory which may adver
the state sovereignty and security of the other Party.' Soon after the conclusion of the treaty the Mong
press statement declared that 'the Chinese side reiterated once again its respect for Mongolia's independ
sovereignty and territorial integrity as well as for its nuclear- weapon-free status'.15 China also 'expressed it

13 'Steady Growth in China-Mongolia Trade, Economic Cooperation, accessed on 27 June 2008 at http://news.xinhuanet.co
2008-06/ 19/content_ 8399506.htm
14 See Article 4 of the China-Mongolia 1994 Treaty, Ministry of Defence of Mongolia (1998: 94).
15 See excerpts from Mongolian-Chinese Press Statement of 29 April 1994, cited in ibid., p. 102.

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 China's Periphery Policy 263

for Mongolia's policy aimed at not admitting the deployment on and transit through its territory of foreign troops,
nuclear and other weapons of mass destruction'.16
While the 1994 Mongolia-China Treaty of Friendship and Cooperation became the legal document determining
the future cooperation objectives, it was during the March 1989 China visit of the Mongolia's Minister of External
Affairs Ts. Gombosoren that a proposal was made to restore military ties between the two countries. And it was
officially restored when in October 1 990 a Chinese delegation headed by Fu Zyanin, the Chairman of External
Relations Office of the People's Republic of China (PRC) paid a visit to Mongolia. Since then reciprocal visits
of the two countries' high-level defence officials have regularly been taking place, thereby helping in confidence
building and cooperation in the defence sector. What was significant in the security cooperation was the conclusion
of the 'Protocol on Cooperation and Exchanges between the Ministry of Defence of Mongolia and the Ministry
of Defence of the People's Republic of China during the visit of a Mongolian military delegation led by the Min-
ister of Defence D. Dorligjav in November 1997. According to the Protocol, the two sides made commitments to
'develop their good neighbourly relations and cooperation on a basis of mutual respect for each other's independence,
sovereignty and territorial integrity, for the principle of mutual non-attack, non-interference in internal affairs, for
equality of rights, for mutual advantages, and for peaceful coexistence'.17
The high-level reciprocal visits of the border troops delegations of the two countries also contributed much
to the development of cooperation in the security of the frontier. During one such visit in November 1999, an
agreement on Cooperation in Frontier Defence was concluded between the Ministry of Defence of the People's
Republic of China and the Frontier Guards Administrative Bureau of Mongolia. The agreement stipulated that
the two sides shall do the following (Information Office of the State Council of the PRC 2000):

1 . To promote cooperation in frontier defence and make efforts to keep peace and stability on the boundary
between China and Mongolia;
2. To exchange information in the interest of maintaining normal order in the border areas and other related
information;
3. To discuss measures and share experiences in guarding and managing the border and maintaining normal
order there;

4. To prevent accidental incidents or disputes in the border areas; and

5. To crack down on illegal activities across the border, such as smuggling of weapons, trafficking in narcotics
and other contrabands robbery and theft.

The strengthening of Mongolia-China security and military ties has come into being not only due to the exchange
of visits between the military leaders of the two countries and the signing of agreements and protocols as well as
their successful implementation but also due to 'the Chinese financial assistance' which enabled the Mongolian
military personnel to carry out their study at the Chinese Defence Academy as well as Military Institutes in the

16 Ibid.

17 Military-Diplomatic Relations of Mongolia , Research Report of the Library of the Institute for Defence Studies, Ulaanbaatar, 1 998, p. 1 39,
cited in S. Ganbold and G. Ragchaa, 'Foreign Relations and Peacekeeping Activities of the Defence Sector, http://www.dcaf.ch/publications/e-
publications/Mongolian_Self_Assessment/6Ganbold_Ragchaa.pdf. Accessed on 27 November 2003.

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264 Sharad K. Soni

PRC (Soni 2006: 223). Significantly, China also agreed to support Defence University of Mongolia wit
resources and text books, besides setting up a Chinese language laboratory there.18 Further on 11
when the Mongolian Defence Minister Jugderdemidiin Gurragchaa visited China on the invitation of hi
counterpart Chi Haotian, he reaffirmed Mongolia's commitment 'to develop the state-to-state and m
military relations with China on the basis of equality, mutual benefit and mutual trust'.19 On his part, t
Defence Minister clearly remarked that strengthening the good-neighbourly relations between China and
conforms to the fundamental interests of the people of the two countries, and is conducive to regi
stability and development'.20
Even in June 2003 during the visit of Chinese President Hu Jintao to Mongolia both sides agreed to s
their cooperation in international and regional affairs in joint efforts to maintain peace and stability in
(Ministry of Foreign Affairs of the People's Republic of China 2003). Further in July 2004 during
President Bagabandi 's visit to China on the eve of the 55 th anniversary of Mongolia-China diplomatic tie
sides signed a document on border management besides reaffirming to intensify their joint efforts for s
peace and stability in the region. Of late, in August 2008, Mongolian and Chinese military officials held t
Defence Security Consultation in Ulaanbaatar, which has been conducted since 2004. The two sides
regional security situation, international peacekeeping, bilateral ties and other issues of common concer
occasion, the Assistant Chief of the General Staff of China's People's Liberation Army (PLA), Chen
said that cooperation between the two militaries in the fields of high-level exchanges, personnel tr
frontier defence had been highly effective which helped promote bilateral relations' {China Economic N
Indeed, growth of military exchanges between Chinese and Mongolian armies and promoting good-n
partnership of mutual trust between the two countries have been the main concerns of Sino-Mongolian
and military ties in recent years.

Potential Risk Factors and Future Trends

The current scenario is that China seeks to act as a benign power that focusses on forging viable political, d
and economic relations with its Asian neighbours. This is more so because China wants to establish and m
peaceful security environment in its periphery. Moreover, geographical proximity and economic compleme
make both China and Mongolia natural partners for increased economic and trade ties. However, it re
be seen whether this growing economic engagement will lead to an expansion of China's soft power,
nation's ability to get what it wants by attracting and persuading others to adopt its goals, instead of
blunt economic and military suasion' (Murphy 2004: 32-33). Potential areas yet to be tapped for major
investments in Mongolia seem to be mining and oil sectors (Xin 2003). Large deposit of oil in the Tams
of Dornod province as well as several new mining deposits of copper, molybdenum, gold, fluorspar,

18 S. Ganbold and G. Ragchaa, 'Foreign Relations and Peacekeeping Activities of the Defence Sector, at http://www.dcaf.ch/public
publications/Mongolian_Self_Assessment/6Ganbold_Ragchaa.pdf
19 See 'Chinese, Mongolian Defence Ministers held Talks', accessed on 18 December 2001 at http://www.tibet.ca/wtnarchive/2
6.html
20 Ibid.

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 China's Periphery Policy 265

and coal have been discovered which largely remain untapped. Even though the Mongolians recognise that their
country's growing economic dependency on China is unavoidable, they are eager to have Chinese cooperation in
mining and oil sectors mainly because Mongolia has vast natural resources and China has the capital to invest in
its extraction. Besides, China has developed its own unique mining technology, especially in extracting liquid fuel
from coal which can be a great help to Mongolia in terms of not only profit but economic security as well.21
Notwithstanding exchanges of high-level visits to forge mutually advantageous relations and booming economic
cooperation, though at the cost of Chinese dominance, some serious issues, which can be potential obstacles/risk
factors in the smooth conduct of Sino-Mongolian relations, can be identified as follows.22

1. Mongolian notion of potential Chinese threat to reoccupy its 'lost territory' is still prevailing, Mongolia
had been the Chinese frontier province under the Qing dynasty from 1691 to 1911 and the Chinese are
alleged to have still been regarding Mongolia as a former part of what it calls the 'Middle Kingdom'. This
is a deep-rooted disagreement that can adversely affect the future relations between China and Mongolia.
2. The issue of 'Pan-Mongolism' or Mongolian nationalism is still a bone of contention between the two sides.
China is increasing its economic leverage in Mongolia in order to ensure the non-involvement of Mongolia
in any kind of ethnic resurgence of Inner Mongols for the Pan-Mongolist cause.
3. The main products exported to Mongolia from China such as flour, rice, sugar and fruits threaten not only
Mongolia's indigenous food industries but also its food security, while Mongolia's export products such as
copper, cashmere, skin, hide and their markets are becoming dependent on China, thus there is the risk of
Mongolia turning into a raw material supplier of a foreign country.
4. Beginning in the late 1990s, Chinese traders started buying raw cashmere from Mongolia's domestic market
and exporting it to China for domestic processing. Consequently, this has drained Mongolia of its cashmere
supply and destabilised its processing plants. Mongolia, which currently contributes 20 per cent to the world
cashmere market, may face unequal competition with China on the world market.
5. Despite promising development in the past few years, problems exist in terms of differences over quality,
supply, payments or even the price of products between the two sides. Besides, mismanagement at the border
posts gives way to illegal acts, such as tax evasion and smuggling that appear to be affecting the reputation
and mutual confidence of both sides and hence the foreign trade. Even Mongolia accuses the Chinese
customs authorities of levying unfairly high taxes and other duties on Mongolian traders and their vehicles.
This factor points to the one-sided nature of border trade that favours Chinese traders.
6. China offers ever-increasing trade and investment facilities in return for Mongolia's acquiescence to the
'One China policy and its approval of the Chinese ban on visits to Mongolia by the Tibetan spiritual leader
the Dalai Lama. It is to be noted that in 2002 when the Mongolian side allowed the Dalai Lama to visit
Mongolia, China reacted angrily and stopped train traffic between the two sides for several days, thereby
jeopardising the steady flow of essentials to Mongolia.

21 During his visit to China in April 2009, Mongolian Prime Minister S. Bayar highlighted this fact while answering questions made by
journalists. See Amarsanaa (2009).
22 Some of the issues are concerned with the historical relations between the two sides, see (Soni 2006: 184).

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266 Sharad K. Soni

7. Mongolia has been excluded from the discussions on the possible route for oil and gas pipeline that is ex
run from Russian Siberia through eastern Mongolia into China. Since the pipeline holds tremendous
for opening a new revenue source for the cash-strapped Mongolia, there are fears that by keeping a
the talks the two giant neighbours will hand the Mongolians a fait accompli and dictate their own
8. In recent years China has also become increasingly concerned about Mongolia-US relations,
after Bush's November 2005 visit to Mongolia. Since Mongolia views the US as its 'third neighbo
regards it as a strategic threat to its own interests in Mongolia. On the other side, instead of
between China and Russia, Mongolia is now tasked with maintaining relations with two new ge
competitors, China and the US.

Whatever may be the other potential risk factors, following trends in the future Sino-Mongolian re
be identified:

1 . Despite the fact that the ongoing Sino-Russian relations have substantially lessened Mongolia's buff
the security policy of its two neighbours, China still considers Mongolia as a country of crucial ge
interest'.

2. Since China shares its longest land border with Mongolia, maintaining cordial relationship with Ulaanbaatar
is of paramount importance for the security and stability of northern China, including Xinjiang, Inner
Mongolia and the north-eastern provinces.
3. The political relationship between Beijing and Ulaanbaatar has developed rapidly, especially since the
late 1980s when the level and frequency of exchanges of high-level visits between the two sides has been
considerably higher than those between Russia and Mongolia. This would continue to contribute positively
towards confidence-building in Sino-Mongolian relations.
4. China's offer to allow Mongolia usage of its Tianjin port gave Ulaanbaatar a main route to the Asia Pacific
in the early 1990s. This created a great opportunity for Mongolia to develop trade relations with rest of the
region. Obviously, Tianjin, which is at a distance of 1900 km from Ulaanbaatar, would continue to be an
economic lifeline for Mongolia since Mongolian exports to the outside world are transported mainly through
this port.
5. With its continued economic growth and depleting natural resources, China needs Mongolia's natural
resources for its rapidly developing industry, such as coal, gold, iron and other precious metals. Therefore,
China's investment interest in Mongolia's strategically important mining and oil sectors may increase in near
future.

6. As regards specific Sino-Mongolian cooperation projects, the two sides could carry out coal-to-oil conversion
projects in Mongolia, create electricity joint ventures, modernise Mongolia's railway system and make use
of the free trade port in the Binhai new area of North China's Tianjin city.
7. In the current scenario, development of infrastructure and exploitation of mineral resources will be one of
the major areas of Sino-Mongolian economic cooperation, in which oil exploration and trade of oil products
are the most promising elements.

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 China's Periphery Policy 267

8. Mongolia has been pursuing an open and non-aligned policy to safeguard its security and national interests
besides strictly adhering to the policy of not stationing any foreign troops, allowing them to transit its
territory, or joining any military alliance against the other. This will continue to help maintain balanced
and friendly relations of Mongolia with its two neighbours - Russia and China.

Conclusion

The conclusion that can be drawn from the above-mentioned discussions is that the post-Cold War era h
only signified the end of strategic conflict but also witnessed economics and politics as playing major r
the individual country's internal and external security interests. Chinas security agenda, which is econo
motivated, too cannot escape from this reality as Beijing moves to great power status seeking to build up its
base in Northeast Asia. On the other side, Mongolia's international relations have now shifted from predomi
political and military fields to economic, scientific-technological and information sectors; in other words,
geopolitics to geo-economics'(Enkhsaikhan 1995). Economic prosperity, therefore, has become a com
priority agenda for both, a giant country like China and a small country like Mongolia in order to ensure
overall security. However, as China, like Russia, is a multi-ethnic state with many Mongolians living the
issue of greater Mongolian autonomy somewhat remains a major Chinese concern in terms of its internal sec
And, therefore, scholars are of the opinion that 'beyond efforts to suppress any movement for greater Mon
autonomy, China can ensure that dissidents do not open any external channels by cooperating with the Mo
government' (Research Institute for Peace and Security 1995: 224).
While China brought to an end Mongolia's efforts to develop closer ties with Taiwan in April 1994 by of
a nuclear non-targeting agreement in exchange for Ulaanbaatar 's acceptance of the One-China policy',
policy makers have indicated that only Moscow can help Mongolia to balance relations with China in the lon
(Anderson 1997: 57). It is, therefore, obvious that the close connection between Russia-China and China-Mon
relations would remain a part of the new international order particularly in the Northeast Asia. Moreover, w
increase in China's energy demand, a stable and neutral Mongolia is more important for China, which could
both as a minerals exporter and a transportation corridor between resource-rich Siberia and Far Eastern Rus
resource-hungry coastal and central China. Besides, having already an observer status at the Shanghai Coope
Organization (SCO), which includes China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, there
been indications that Mongolia would seek full membership in the SCO. It may be argued that due to cu
economic realities, the SCO is destined to be dominated by China rather than Russia and hence membership i
grouping could give Ulaanbaatar further incentives to forge closer ties with Beijing (Blagov 2005: 10). Nevert
the changes in the whole dynamics of Sino-Mongolian relations, especially during the last two decades or so
much to the new developments in China's policy towards what it describes as periphery' countries. On the
Chinese leadership appears to be satisfied with Beijing's regional policy as applied to its relations with M
For it has been both economically as well as strategically advantageous in order to strengthen China's growin
as an Asian, if not a global power.

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268 Sharad K. Soni

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