Source: China Daily    Date: May 13, 2010

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 in Beijing said on Tuesday. "We're still in very initial stages of discussions," said Mr. 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 USD2.4 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. 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 Mr. 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 USD120 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 Mr. 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, he said.

Mr. 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 National Mining Association.