Mongolia puts its faith in China railway to boost Covid-battered economy

Mongolia opened a new rail link to China on Friday, which the landlocked country’s prime minister said would help it counter zero-tolerance Covid controls that have disrupted cross-border trade with its powerful neighbor.

“The opening of the new railway is historically important for Mongolia,” Oyun-Erdene Luvsannamsrai told the Financial Times ahead of the opening of the Zuunbayan-Khangi railway line, which will transport goods from fields including Rio Tinto’s Oyu-Tolgoi project. to the second largest economy in the world.

After a nearly three-year hiatus caused by Covid-19 and China’s strict epidemic control, cross-border trade is finally nearing pre-pandemic levels. “Currently, the average is 1,300 [commodity] Cars leave the border of Mongolia every day,” said the Prime Minister. “In 2019, it was 1,500.”

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Mongolia’s economy grew 3.7 percent year-on-year in the third quarter of this year, its biggest growth since 2019. Economic output grew by only 1.4 percent in 2021 after falling 4.6 percent in 2020.

Zuunbayan-Khangi is one of three new rail links with China, which Luvsannamsrai says will increase export capacity by an additional 4,500 cars per day and help reduce Mongolia’s traditional reliance on trucks to transport iron ore, coal and other bulk commodities.

Truck traffic across the 4,630 km border between the two countries has been frequently halted due to China’s fears that the drivers will be infected with the virus.

“Using trucks is time-consuming and costly,” Luvsannamsrai said. “The railway is much better. It has a low risk of contracting Covid and is the safest way to export.”

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The 227-kilometer Zuunbayan-Khangi railway was completed in just eight months, as construction work was impossible during the freezing winter in Mongolia. It connects with a newly built counterpart in China that can transport goods to industrial centers such as Baotou in the Inner Mongolia region of China.

Luvsannamsrai, 42, was appointed prime minister in January 2021 and launched the “New Modernization Policy” aimed at increasing Mongolia’s exports to China, paying off foreign debt and reducing dependence on Russia for energy.

He said 90 percent of Mongolia’s exports go to China and that the country is “totally dependent” on Russia for energy supplies. These lifelines have been threatened, respectively, by Beijing’s controversial zero-covid policy and international sanctions imposed on Moscow over its invasion of Ukraine.

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President Xi Jinping’s administration has reiterated its commitment to zero Covid to contain the virus in China. But Luvsannamsrai said he was optimistic that things would improve next year after the country appointed a new prime minister in March, most likely Li Qiang.

“Later [January] In the Lunar New Year in China, we believe that the new government that will take office in March will mainly focus on economic growth,” he said. “Because of this, vaccination rates will be much higher in all countries, so we expect better days to come.”

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