Economy

Free trade pact with Mongolia on the cards

By Zhou Yan (China Daily)
Updated: 2010-05-12 09:44

BEIJING: China has initiated feasibility studies for a free trade agreement (FTA) with Mongolia to further strengthen bilateral trade ties between the two nations, a top official from the Ministry of Commerce said on Tuesday.

"We're still in very initial stages of discussions," said Zhou Changting, counselor of the Asian affairs department under the Commerce Ministry, adding that the plan was proposed to cement trade ties between the two nations, especially in the mining sector.

According to figures from the ministry, bilateral trade between the two countries reached $2.4 billion in 2009, 50 times higher than 1991 and accounted for 47.4 percent of Mongolia's total foreign trade. China has been the largest trade partner of the country for 11 consecutive years.

Mongolia has some of Asia's richest deposits of 80 minerals including coal, copper, iron ore and zinc, but most remain largely unexploited due to the undeveloped economy.

The mining industry contributed 21.1 percent to Mongolia's gross domestic product in 2009, and the proportion is steadily climbing as the country seeks to grow its mineral resources for economic development, said Bataa Batkhuu, director of the department for mining and heavy industry of Mongolia's Ministry of Mineral Resources and Energy.

China, which is the main importer of mineral products from Mongolia, has speeded up its cooperation with Mongolia in the natural resources sector given the huge domestic demand.

According to Zhou, Chinese companies' investment scale in the neighboring country, especially in mining and oil exploration, has grown rapidly in recent years. The total capital invested by Chinese companies last year in Mongolia was 7.9 times higher than a year earlier and stood at $120 million spread over 4,000 projects.

"We're actively seeking equity investment in Mongolian companies for minerals like iron ore, zinc and lead," said an investment manager at Western Mining, China's seventh-largest copper miner.

"The proposed China-Mongolia FTA will benefit both countries by facilitating more cross-border trade and easing increasing trade frictions when more Chinese enterprises enter the country for business opportunities," said Huang Ying, an associate researcher at China Institute of Contemporary International Relations.

Mongolia is reliant on China's light industry exports, and hopes to optimize its infrastructure construction through Chinese investments in the country, said Huang.

Zhou said the two countries will diversify their cooperation to sectors like telecommunications, environment protection and high-tech.

Over 5,000 foreign firms from more than 20 countries have currently invested in Mongolia's mining industry so far, according to the Mongolia Mining Association.

Apart from Mongolia, China is also exploring possible FTAs with India and South Korea. So far, China has signed FTAs with nine countries and regions including Pakistan and the Association of Southeast Asian Nations, and is currently in talks with the Gulf Cooperation Council, Australia, Iceland, Norway and the Southern African Customs Union.