Central Bank Introduces New Reserve Rule for Foreign Borrowing www.montsame.mn

The Monetary Policy Committee of the Bank of Mongolia has adopted a new macroprudential policy measure requiring banks to hold mandatory reserves equal to 25 percent of foreign funding raised for periods ranging from 360 days to three years, starting October 1, 2026.

Previously, the central bank did not impose reserve requirements on funds raised from international markets with maturities exceeding one year. Under the new policy, such funding sources will now be subject to mandatory reserve requirements.

According to the Bank of Mongolia, the measure is intended to reduce liquidity risks associated with banks’ reliance on foreign currency-denominated funding amid heightened uncertainty in the external economic environment.

In recent years, the combined value of bonds and loans raised by Mongolian banks from foreign markets has accounted for around 19% of the banking sector’s total funding sources, while the sector’s loan-to-deposit ratio has reached approximately 138%.

The central bank noted that research on emerging economies shows banking systems need to pay closer attention to balance sheet vulnerabilities, particularly rising currency and maturity mismatches between assets and liabilities, which may increase financial fragility.

The Bank of Mongolia stated that systemic cyclical risks in Mongolia’s banking sector have declined compared to previous periods, while the financial cycle has shifted toward a more balanced level. Stress test results conducted by the central bank also showed that banks would maintain adequate capital buffers and risk-bearing capacity even under major macroeconomic shocks.

Nevertheless, the central bank said the policy was introduced to prevent the accumulation of future risks in the banking sector and encourage banks to secure more long-term funding from international markets.

Consumer Loan Defaults Stabilize in Recent Months www.montsame.mn

MONTSAME national news agency, in cooperation with MICC Mongolia International Capital Corporation (MICC LLC), presents to its readers a weekly overview of Mongolia’s domestic capital market and economic developments.

Weekly Capital Market and Economic Review

(2026.05.18–2026.05.25)

 MONGOLIAN STOCK EXCHANGE

A total of 4.9 million securities worth MNT 4.6 billion were traded on the Mongolian Stock Exchange over the past week. In terms of trading value, Khan Bank JSC, State Bank JSC, Mongolian Stock Exchange JSC, Innovation Investment JSC, and Golomt Bank JSC led the market. During this period, one block trade was executed:

1 million shares of State Bank JSC (TGI) were traded at MNT 442 per share, totaling MNT 442 million.

Last week, the Mongolian Stock Exchange indices closed with mixed performance, with selective buying observed in the market. The TOP-20 index rose by 0.58% to reach 50,961.19 points, while the MSE B index increased by 0.65%, indicating a modest recovery in demand for small-cap stocks. Meanwhile, the MSE A index declined by 0.12%, reflecting relatively stable movement among large- and mid-cap stocks, alongside ongoing profit-taking.

Market behavior suggests that investors are adopting a more selective stance, gradually shifting from highly liquid stocks toward segments with higher growth potential.

ECONOMIC GROWTH REMAINS DRIVEN BY MINING AND FINANCING

According to the preliminary results for the first four months of 2026 released by the National Statistics Office, Mongolia’s economic growth continues to be primarily supported by mining, exports, and financial inflows.

Total industrial output increased by 54.1% to reach MNT 21.8 trillion, while exports surged by 60.6% to USD 6.8 billion. At the same time, total turnover in the securities market rose 2.2 times, indicating strong financing activity through the capital market.

Key indicators:

Total industrial output grew by 54.1%, led by a 67.5% increase in mining production.
Securities market turnover reached MNT 563.7 billion, up 2.2 times year-on-year.
Inflation rose to 10.1%, with food prices increasing by 19.4%, placing pressure on household consumption.
GDP grew by 8.0% in the first quarter of 2026 (at constant prices), with mining contributing the largest share.
 Although exports and industrial growth remain strong, manufacturing growth was only 8.4%, indicating uneven distribution of growth across sectors. A decline in the physical volume index suggests that high commodity prices have been a key driver of overall growth.

In the labor market, the unemployment rate rose to 5.7%, while the labor force participation rate declined to 60.4%. Persistent double-digit inflation continues to weigh on domestic consumption and households’ real purchasing power.

In the capital market, primary market transactions accounted for 65% of total turnover, reflecting strong corporate activity in raising funds through the market. However, secondary market growth remains relatively weak, indicating that liquidity and participant activity have yet to fully expand.

While revenue expectations for mining-related companies remain high, stocks linked to domestic consumption and manufacturing on the Mongolian Stock Exchange continue to show more selective growth patterns.

BUDGET REVENUE RISES, BUT DEFICIT REACHES MNT 1.4 TRILLION

According to preliminary data for the first four months of 2026, total government consolidated budget revenue and grants reached MNT 10.2 trillion, an increase of 13.8% (MNT 1.2 trillion) compared to the same period last year. Meanwhile, balanced revenue and grants amounted to MNT 8.9 trillion, reflecting a 5.4% annual increase.

Despite continued revenue growth, total expenditure and net lending reached MNT 10.4 trillion, resulting in a balanced budget deficit of MNT 1.4 trillion. This marks a significant shift from the surplus recorded during the same period last year, indicating that expenditure growth has begun to outpace revenue growth.

Key indicators:

Total budget revenue and grants: MNT 10.2 trillion (+13.8%)
Balanced revenue: MNT 8.9 trillion (+5.4%)
Total expenditure and net lending: MNT 10.4 trillion
Balanced balance: MNT -1.4 trillion deficit
Total tax revenue reached MNT 8.3 trillion, up 4.3% year-on-year, driven mainly by a 17.6% increase in social insurance revenue and a 5.8% rise in VAT revenue. However, personal income tax revenue declined by 5.7%, and excise tax revenue dropped by 28.6%, reflecting weaker domestic consumption and import activity.

In terms of revenue structure, 29.9% came from income tax, 23.4% from VAT, and 23.4% from social insurance contributions. Meanwhile, total budget expenditure increased by 32.5% compared to the same period last year, with notable rises in both current and capital spending.

Although strong economic growth and mining export revenues are supporting budget income, faster growth in expenditure is increasing fiscal pressure. For the capital market, a rising budget deficit may lead to greater government reliance on domestic bond financing, potentially increasing the supply of fixed-income instruments in the market.

CENTRAL BANK ADJUSTS RESERVE REQUIREMENTS ON EXTERNAL FUNDING

The Monetary Policy Committee of the Bank of Mongolia has decided that, starting October 1, 2026, 25% of foreign currency bonds and loans with maturities between 360 days and 3 years raised by banks from international markets will be included in the base for required reserves.

Previously, these funding sources were fully excluded from the reserve requirement base; under the new regulation, only 75% will be excluded, while reserves will be calculated on the remaining 25%.

The Bank of Mongolia stated that this measure aims to reduce vulnerabilities arising from currency and maturity mismatches in the banking sector and to mitigate risks associated with excessive reliance on short- and medium-term external funding. Studies show that in developing countries, accumulated mismatches in assets and liabilities can increase systemic risk.

Currently, approximately 19% of the banking sector’s total funding comes from foreign bonds and loans, while the loan-to-deposit ratio has reached 138%, indicating a growing reliance on external financing alongside domestic deposits.

The central bank also noted that stress test results show that even under major macroeconomic shocks, the banking system’s capital adequacy would remain at a sound level. Meanwhile, non-performing consumer loans have stabilized in recent months, and the volume of loans under special mention has begun to decline.

From a capital market perspective, this decision is expected to increase the cost of short-term external funding for banks and raise the need for domestic funding sources. For banks listed on the Mongolian Stock Exchange, factors such as funding structure, net interest margins, and external debt levels are likely to attract greater investor attention.

Government Approves Major Restructuring of Erdenes Mongol www.montsame.mn

The Government of Mongolia has decided to reorganize Erdenes Mongol LLC into the “Chinggis Khaan National Wealth Fund Corporation” during its cabinet meeting on May 27.

The restructuring aims to fully align Erdenes Mongol with the functions outlined in the National Wealth Fund Law by transforming the company from a traditional state-owned mining management entity into a professional financial institution operating under international standards. The new structure will oversee state asset management, investment, sovereign wealth fund management, IPOs, and privatization in a phased manner.

The government said the reform is expected to improve the management of state-owned mining assets and create conditions for delivering more sustainable and accessible benefits from natural resources to citizens over the long term.

Prime Minister Uchral Nyam-Osor also instructed the management of Erdenes Mongol to consolidate or dissolve up to 10 subsidiaries with overlapping functions and low efficiency, while maintaining the normal operations of profitable extraction companies and firms involved in international agreements or projects of strategic importance.

According to preliminary estimates, the restructuring is expected to:

optimize around 260 positions,
reduce administrative expenses by 10%,
lower rental costs by 30%, and
generate total savings of approximately MNT 67.3 billion.
The cabinet instructed relevant authorities to finalize and approve all related decisions and resolutions by June 15.

Management of Erdenes Mongol stated that state-owned mining companies are prioritizing efficient and cost-effective use of underutilized state-owned office space and real estate instead of paying high rents for expensive commercial office buildings. 

Capital Markets Mongolia Successfully Hosts Inaugural Mongolia Investment Forum in Shanghai www.capitalmarkets.mn

Capital Markets Mongolia (CMM) hosted the inaugural Mongolia Investment Forum: Shanghai 2026 at the Grand Hyatt Shanghai, the fourth edition of its global series following New York, London, and Singapore. The Forum brought together more than 300 delegates from over 200 companies and organizations, convening institutional investors, policymakers, and industry leaders to mobilize long-term capital across Mongolia's priority sectors.

CMM extends its appreciation to global partner Huawei; sponsors Rio Tinto, Envision Energy, and MCS International; and presenting partners Golomt Bank JSC, Guotai Junan International, Monlogistics Holding JSC, SOBT Holding LLC, and Erdenes ITP. Special recognition is extended to the Consulate General of Mongolia in Shanghai, as the Forum's supporting organization was instrumental to its success. 

The Forum drew more than 300 delegates representing over 200 companies and organizations, with participants spanning China, Hong Kong, Singapore, South Korea, and Australia. Attendees represented multiple sectors: more than 40 Chinese energy and clean technology companies; over 50 financial institutions, asset managers, and securities firms, including global names such as JPMorgan, Goldman Sachs, Deutsche Bank, BNY, China Investment Corporation, China Life Insurance, Aberdeen Investment, and S&P Global Ratings; over 20 manufacturing and industrial companies; more than a dozen technology firms led by Huawei and Dahua Technology; and over 20 trade, government, and industry associations. 

The Mongolian delegation was led by Zoljargal Jargalsaikhan, Member of Parliament; Lodoisambuu Chuluunbileg, Member of Parliament; Batkhuu Idesh, State Secretary of the Ministry of Economy and Development; and Bold Dorjderem, Consul General of Mongolia in Shanghai. 

More than 35 Mongolian companies and institutions were represented, including Development Bank of Mongolia, Trade and Development Bank, Khan Bank, Shunkhlai Group, Stairway, Khan Altai Resource, Fingate Financial Group, State Bank of Mongolia, MMS Engineering LLC, Invescore Capital, Apex Capital, Golomt Capital, Sendly NBFI, and Ride Mongolia, among others. 

As Mongolia's largest trading partner, China plays a central role in Mongolia's economic future. The Forum connected Mongolian policymakers, state-owned enterprises, and companies with Chinese investors, industrial partners, and financiers across three priority themes aligned with Mongolia's next phase of growth: mining and critical minerals, energy and industrial modernization, and emerging technology and digital infrastructure.

Green Energy & Smart Industry: A high-level panel moderated by Leo Wang, Head of China Research at BloombergNEF, brought together Malek Zhang of Huawei Technologies, James Lok of AIIB, Hu Yuanwei of Envision Energy, and Orchlon Enkhtsetseg, CEO of Net Zero Energy LLC, to address Mongolia's energy transition and smart industrial development.
Mining, Critical Minerals & Industrial Parks: SOBT Holding presented its critical minerals project portfolio, while Erdenes ITP outlined investment opportunities in Mongolia's industrial parks, a cornerstone of the country's manufacturing strategy. 
Capital Markets & Investment Pitches: Guotai Junan International addressed China–Mongolia financial interconnection and Mongolia's international debt capital markets landscape. Golomt Bank JSC and Monlogistics Holding JSC each presented their investment cases to institutional audiences.
Three signing ceremonies marked the Forum's concrete outcomes: MCS International and Envision Energy formalized a strategic partnership agreement; Stairway LLC and TZME (Tianjin) signed a cooperation agreement; and Shunkhlai Group and Huawei Mongolia agreed to jointly develop large-scale utility solar and battery energy storage projects in Mongolia, with Shunkhlai Group serving as EPC partner and Huawei Mongolia providing Smart PV and Grid-Forming BESS technology. Together, these agreements represent significant steps in institutionalizing China–Mongolia investment cooperation. 

Mongolia Investment Forum: Shanghai 2025 demonstrated that appetite for Mongolia-focused investment is deepening well beyond traditional corridors. Across every session, from green energy and critical minerals to logistics, industrial parks, and capital markets, Chinese investors and Mongolian project sponsors found common ground on concrete, near-term opportunities. The two signing ceremonies on the day reflected a broader shift: conversations that began at previous CMM forums in New York, London, and Singapore are now translating into signed agreements and operational partnerships. 

CMM will continue to develop the Mongolia Investment Forum as an annual platform in Shanghai, deepening engagement across mining and critical minerals, clean energy, infrastructure financing, and digital transformation, the four pillars of Mongolia's long-term growth agenda. Future editions will expand the programme to include bilateral working groups, site visits, and follow-on dealmaking sessions to accelerate the pipeline of China–Mongolia transactions. 

National Green Lab Shortlists Top Projects for COP17 www.montsame.mn

Mongolia has launched the final selection stage of the “National Green Lab” platform, an initiative aimed at supporting nature-based solutions and sustainable financing ahead of the country’s hosting of the 17th Conference of the Parties to the United Nations Convention to Combat Desertification (COP17) in 2026.

Initiated by the Office of the President of Mongolia in partnership with the Mongolian Nature Legacy Foundation and the Business Council of Mongolia, the program seeks to identify environmentally impactful and scalable green projects and prepare them to meet international investment standards.

The platform provides selected projects with two months of technical and financial advisory support, capacity-building programs, and mentorship to help improve investment readiness and connect them with domestic and international investors.

This year’s selection process places particular emphasis on projects related to sustainable pasture management, ecosystem restoration, and conservation, in line with Mongolia’s preparations for COP17 and the UN designation of 2026 as the International Year of Rangelands and Pastoralists, an initiative proposed by Mongolia.

Projects were accepted in six main categories, including pasture protection, sustainable natural resource use and livelihoods, land restoration and soil health, sustainable supply chains, green finance and market-based conservation financing, and technology-driven pasture management solutions.

A total of 135 projects were submitted, of which 71 advanced to the preliminary evaluation stage. Thirty projects were then shortlisted for the final round, where participants presented their proposals before a panel of judges. More than 10 top-performing projects will advance to the development phase of the National Green Lab platform and receive support for project refinement, investment preparation, and international-level training programs.

Javkhlan Bayarsaikhan, Advisor to the President on Project Coordination and Civil Society Policy, said, “After launching the initiative in February, we accepted project applications through the National Green Lab website. Out of 135 submitted projects, around 70 were selected following registration and preliminary screening. From these, 30 projects advanced to the next selection stage, and we are now working to choose the best proposals for the final round.

“The selected projects will be incubated and further improved until August before being presented during COP17. National Green Lab does not promise direct investment or fundraising. Rather, its goal is to provide free professional support to help projects develop and improve. In other words, whatever type of advice or enhancement a project requires, the platform will provide targeted assistance.

“During this period, participants will also take part in regular training programs, including project development, incubation, and project management training organized by international institutions such as PMI and Ernst & Young. We are also planning two separate events during COP17 where participants will present their projects. At these events, domestic and international investors will have the opportunity to review the improved projects and potentially invest in those they find promising.

“To reiterate, National Green Lab is not an initiative that directly secures investment funding. It is a voluntary collaborative initiative in which partner organizations work together to help projects improve free of charge and prepare them for presentation at the international level,” she said.

Nomindari Enkhtur, Executive Director of the Mongolian Nature’s Legacy Foundation, said, “The Mongolian Nature’s Legacy Foundation is supporting the implementation of this program voluntarily. We are involved in organizing the entire process, from establishing the working office to coordinating operations.

“We will finalize the top 10–15 projects within this week. The selected projects will have the opportunity to present their ideas to the public, foreign delegates, and investors attending COP17. The main goal is to serve as a bridge connecting people with impactful and innovative project ideas to organizations and individuals interested in investment.

“As Mongolia prepares to host COP17, both foreign and domestic investors are showing strong interest in pasture and environmental projects. National Green Lab aims to create opportunities to connect these two sides.

“After the top projects are selected, they will participate in a two-month incubator program providing technical support. Unlike traditional incubators that last for many months, this program is specifically designed to prepare participants for COP17. For example, participants will receive training and advisory support on how to present projects to international investors and how to prepare effective pitches.

“In some cases, projects may demonstrate significant environmental impact but lack financial sustainability. Therefore, depending on each project’s specific needs, professional advice and support will be provided in areas such as finance, environmental impact, project development, and presentation skills. As a result, the selected projects will be prepared according to unified standards, and around 15 projects will have the opportunity to openly present their proposals to the public and investors during a special event organized alongside COP17,” she said.

The judging panel includes representatives from the Ministry of Environment and Climate Change, the Ministry of Food, Agriculture and Light Industry, the Food and Agriculture Organization of the United Nations in Mongolia, The Nature Conservancy, the Business Council of Mongolia, the Mongolian Nature’s Legacy Foundation, PMI Mongolia, Trade and Development Bank of Mongolia, and Khan Bank.

Mongolia introduces identification signs for pregnant women www.xinhuanet.com

Mongolia's National Center for Public Health announced on Wednesday that identification signs for pregnant women have begun to be used nationwide as part of efforts to improve their safety and social support.

The signs are being distributed through family and district health centers with the aim of enhancing the safety and well-being of pregnant women while promoting greater public awareness and understanding in public spaces.

According to the center, the initiative seeks to create conditions that encourage appropriate support and respect for pregnant women in public areas, public transportation, and service environments.

The signs are also expected to help inform others in cases where pregnancy may not yet be visibly noticeable during the early stages.

Officials noted that the measure will help foster a more supportive and pregnancy-friendly social environment while also contributing to the safety of pregnant women.

In the Asian country of 3.5 million people, the birth rate has continued to decline year by year. While an average of 80,000 women used to give birth annually, the number fell to 54,000 last year, according to official data.

Road construction for COP-17 to be completed by July 1 www.gogo.mn

The 17th Conference of the Parties to the UN Convention to Combat Desertification (COP-17) will be held in Mongolia from August 17 to 28, 2026.

The capital city is responsible for temporary facilities, road construction, and utility networks for the conference. In this context, bicycle lanes, pedestrian paths, and parking areas are planned to be built over an area of 80,000 square meters.

Overall progress on the project stands at 78%. So far, 10,000 square meters of sidewalks have been paved with colored tiles, 70,000 square meters of cement-reinforced crushed stone have been laid, and 70,000 square meters of asphalt concrete base has been completed.

The road construction is scheduled to be completed by July 1.

B.Purevdagva appointed Governor of the Capital City and Mayor of Ulaanbaatar www.gogo.mn

Prime Minister N.Uchral approved B.Purevdagva as Governor of the Capital City and Mayor of Ulaanbaatar and handed over the mayor’s seal to B.Battsetseg, First Deputy Chief Cabinet Secretary.

On May 26, 2026, the non-regular 12th session of the Citizens' Representatives Khural of the Capital City held, and B.Purevdagva, a member of the board of the Mongolian People’s Party and its secretary, was nominated as Governor of the Capital City and Mayor of Ulaanbaatar and was supported by a majority vote.

the Citizens' Representatives Khural of the Capital City subsequently approved the draft resolution appointing B.Purevdagva as Governor of the Capital City and Mayor of Ulaanbaatar and submitted it to Prime Minister N.Uchral, making him the 37th mayor of Ulaanbaatar.

In his remarks, B.Purevdagvа expressed gratitude to the city’s previous leaders for strengthening Ulaanbaatar’s legal and economic capacity and creating new development opportunities. He said he would ensure the implementation of the roadmap promised to citizens and continue major projects and programs in an open and transparent manner.

Interim Trade Agreement to Diversify Export Structure, Markets www.montsame.mn

The Interim Trade Agreement between Mongolia, the Eurasian Economic Union (EAEU), and its member states will officially enter into force on July 22 this year.

To formalize the arrangement, Minister of Economy and Development of Mongolia Enkhbayar Jadamba and Member of the Board of the Eurasian Economic Commission in charge of Trade A. A. Slepnev signed the “Joint Statement on the Entry into Force of the Interim Trade Agreement between Mongolia, the Eurasian Economic Union, and its Member States.”

During an online meeting jointly organized by the Ministry of Economy and Development and the Eurasian Economic Commission, the Commission officially handed over to Davaa D., Ambassador Extraordinary and Plenipotentiary of Mongolia to Russia, diplomatic notes confirming that all EAEU member states have ratified the agreement in accordance with their domestic legislation.

The parties also endorsed a “Joint Roadmap for the Implementation of the Interim Trade Agreement between Mongolia, the Eurasian Economic Union, and its Member States,” and expressed their commitment to closely cooperate in ensuring its effective implementation and in strengthening collaboration among relevant institutions, the Ministry of Economy and Development reported.

The agreement is expected to create more favorable conditions for Mongolian export products to enter the EAEU market of over 180 million consumers. It is also significant for reducing trade barriers, improving the business environment, and expanding cooperation in trade, investment, and industrial production. Furthermore, the agreement will enhance Mongolia’s participation in regional economic integration and support the diversification of the country’s export structure and markets.

The online meeting was attended by officials from the Ministry of Economy and Development and the Eurasian Economic Commission, as well as the Ambassador Extraordinary and Plenipotentiary of Mongolia to Russia and the Ambassadors Extraordinary and Plenipotentiary of Russia, Belarus, Kazakhstan, and Kyrgyzstan accredited to Mongolia.

Toward a US-Mongolia Critical Minerals Partnership www.nationalinterest.org

China’s northern neighbor has the potential to help reduce US and global reliance on Beijing’s critical minerals.
China’s rocky relationship with Taiwan frequently sparks headlines, but its bond with Mongolia hardly ever does. Beijing, however, does not view Mongolia as just another neighbor. 

In his diaries from a 1974–1975 posting in Beijing, George HW Bush—then chief of the US Liaison Office in China—recalled a stunning admission from Deng Xiaoping. On the topic of Mongolia, which had been part of the Qing Dynasty territory prior to Mongolian independence in 1911, Deng complained to Bush that Mongolia had been “unfairly” taken away from China by Russia. Deng added that, while China would not attempt to retake Mongolia in the near-term, the situation could be different “in a hundred years.” 

Half a century has passed since Deng’s remark, and while much attention is paid to Beijing’s remonstrances regarding Taiwan—and rightly so—the Chinese Communist Party (CCP) holds similarly expansionist positions regarding Mongolia. 

The China-Mongolia question is not merely a historical curiosity or a matter of Inner Asian affairs; it is highly relevant to another facet of US-China competition: the need to develop supply chain alternatives to China’s current monopoly on rare-earth production and exports. 

In recent years, Chinese restrictions on rare-earth exports and near-complete control of rare-earth refining capacity have forced the United States and EU countries to develop alternative sources of supply and refinement rapidly. In this process, the opportunity for the United States to cooperate with Mongolia to develop and export Mongolia’s rare-earth reserves has been overlooked. 

China continues to aggressively seek control over Mongolia, not only for the neo-colonial reasons mentioned above, but also to further solidify its chokehold on global rare-earth supply chains by integrating Mongolia’s vast reserves into its extractive arsenal. 

Mongolia, a sparsely populated nation of 3.5 million people, sandwiched between Russia and China, is estimated to hold about 17 percent of world reserves, second only to China’s 24 percent share. In June 2023, Mongolia and the United States signed a Memorandum of Understanding in which both sides “agreed to advance secure and resilient critical mineral supply chains in the Indo-Pacific region.” 

One month before the agreement was signed, French President Emmanuel Macron visited Mongolia. Part of his visit focused on enhancing cooperation between Orano, a French nuclear company, and MonAtom, Mongolia’s state-owned nuclear enterprise, regarding the Zuuvch Ovoo uranium mine in southern Mongolia. In January 2025, Orano and MonAtom reached an agreement to develop Zuuvch Ovoo jointly. 

France has clearly recognized the value of joint mineral exploration in Mongolia. The time has come for the United States to do the same, based on the following principles:

First, Mongolia and the United States share a joint commitment to constitutional governance, democracy, and freedom of speech.

Second, Mongolia holds a large share of the world’s rare-earth reserves and would greatly benefit from their development.

Third, the United States maintains a strategic interest in sourcing refined rare-earth elements from countries not identified as nations of concern. 

Based on these principles, the United States and Mongolia should consider the following avenues of cooperation:

1. Joint development of rare-earth deposits in Mongolia involving an American-Mongolian consortium of companies. 

2. Development Finance Corporation (DFC) financing of rare-earth refining capacity in Mongolia, in concert with the French, South Korean, and other countries with relevant capabilities.

3. DFC partial financing of a nuclear power plant in Mongolia, solving long-term issues with the capital, Ulaanbaatar’s, power supply, and divesting Mongolian energy supply away from Russia and China.

4. DFC financing of American-made agricultural equipment sales to Mongolia, as American agricultural equipment is best-in-class and highly sought after in Mongolia. Further sales would strengthen Mongolian food security while supporting America’s productive economy. 

5. Department of State authorization of Farmer-in-Residence and Rancher-in-Residence positions at the US Embassy in Ulaanbaatar, to provide expert technical advice to the Mongolian agricultural sector and build on shared cultural traditions of horsemanship.

For cooperation to be lasting and effective, Mongolia must ensure that American investors are protected and not subject to arbitrary regulations. At the same time, the use of DFC financing, given its clear sponsorship from the US government, will help to deter regulatory irregularities.

However, the largest obstacle to effective and realistic US-Mongolia engagement is China’s attempt to reduce Mongolia to a vassal state entirely reliant on the People’s Republic of China. China’s neo-colonial approach to Mongolia is causing concern among foreign investors in Mongolia’s rare-earth sector. Since shipping Mongolian products through China is the most cost-effective, China’s unpredictable policies could delay or seize rare-earth shipments destined for countries such as the United States or Japan. 

To counteract potential anti-trade measures from China, multinational, coalition-based financing and extraction efforts ought to be utilized. Indeed, China has demonstrated a clear appetite for imposing punitive measures on American companies seeking to develop alternative supply chains outside China-dominated industries, such as the rare-earth industry. 

However, China is far less likely to inflict such punitive measures if rare-earth development projects are organized at the multilateral level. While Beijing pulls no punches when criticizing or inflicting punitive measures on the United States, it is less likely to engage in disruptive activity if countries such as South Korea or France are involved. 

To prevent yet another democratic, America-aligned ally from falling further into China’s grip, the US and its partners must pool readily available institutional resources with a sense of urgency. After all, there is much to be gained in the process.

About the Author: Edward Owen
Edward Owen is a senior policy analyst in the Asian Studies Center at the Heritage Foundation. His work analyzes Chinese activity in Southeast Asia and Latin America. Before joining Heritage, Owen worked as a director at Baron Public Affairs, a political risk consultancy. At Baron, he supported consulting projects for private-sector clients and the US Department of War, providing insight into PLA strategy, CCP bureaucracy, regulatory culture, and global Chinese commercial networks. His role at Baron saw him travel extensively across Southeast Asia, including Thailand, Malaysia, and the Philippines. Hollins Randolph, a former member of Heritage’s Young Leaders Program, contributed to this article.