Mongolia’s Development And Increasing Dependence On China

Abstract

The collapse of the Soviet Union has led to economic hardship in Mongolia. Its national gross domestic product fell by about 1/3 and the economy entered a deep recession. However, this allowed Mongolia to democratize its political system and transform its socially planned economy into a market-based liberal economy. In the early 2000s, the economy of Mongolia recovered, and since then it has achieved rapid economic progress. Over the past 20 years, its GDP grew from about 2 billion US dollars in 2004 to over 19.87 billion US dollars at the end of 2023. At the same time, per capita income rose from 785 dollars to 5765 dollars.  Mongolia has significantly reduced poverty, greatly improved the well-being of its citizens, and achieved upper middle-income country status. Despite significant achievements, Mongolia has limitations as it is surrounded by giant neighbors and highly dependent on them in terms of security, trade, and economy. While the influence of Russia is declining, Mongolia still highly depends on fuels and electricity from Moscow. In contrast to Moscow, Beijing’s influence in Mongolia is rising rapidly and steadily. China accounts for over half of the Mongolian overall trade and more than 91% of its exports. The increasing dependence of Mongolia is making its progress vulnerable to external shocks.