In resource-rich Mongolia, debate lingers on China ties

"So, while there will be a lot of investment from China, there will be limits to that investment. There will need to be a lot of partnership arrangements with Mongolian companies to facilitate Chinese investment."

China, for its part, has been clear about its economic ambitions in the northern land of windswept grassland.

More than 70 percent of Mongolia's exports went to its southern neighbour last year. China's coal giant Shenhua is pitching for a slice of Tavan Tolgoi, one of the world's largest untapped coal deposits, and CIC, China's $300 billion sovereign wealth fund, has backed Mongolia-focused miners such as SouthGobi Energy Resources Ltd (1878.HK: Quote) (SGQ.TO: Quote).

What's more, the bulk of Mongolia's oil is being produced by Chinese firms and most of the big projects now being developed -- including Ivanhoe Mines' (IVN.TO: Quote) $5 billion copper-gold project at Oyu Tolgoi -- are also counting on surging Chinese demand.

ALARM BELLS

These developments continue to sound alarm bells among Mongolia's political elite as the government formulates investment agreements on strategic assets such as Tavan Tolgoi, and massive rail and infrastructure projects.

Feeding into the debate is Mongolia's determination to forge its own path and shed its historical vulnerability as a landlocked country sandwiched between Russia and China.

"Mongolia has been quite careful about its sovereignty -- we don't want to be too dependent on one country," said Oyun Sanjaasuren, a lawmaker and former foreign affairs minister.

"Theoretically, we want to have a one-third, one-third, and one-third balance," Oyun added, referring to China, Russia and a third country such as Japan or the United States.
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