Once a green pasture for foreign investors, is now reeking of impending doom. Mongolia is in a dire state which is a sharp reversal of the country’s fortune. Mongolia is going through an extensive currency crisis, where an economic boom turned into a dreadful nightmare in just a span of a few years.
Well, who is deemed to be responsible for such a miserable state of affairs in the Mongol Nation? The answer is pretty obvious—China.
When Covid-19 lockdowns came into effect in China, it led to the closing of the People’s Republic of China (PRC) borders in 2020. As a result, China’s exports to Mongolia came to a grinding standstill, which led to a drastic rise in domestic inflation and product shortages in the country. Exports from Mongolia are also significantly declining, severely hampering constricting the flow of US dollars into the nation.
China’s ‘Zero-COVID’ Policy
For more than two years now, China is still reeling under its stringent “Zero COVID” policy. Under this policy, China has wholly locked down several states to stamp out each infection, instead of mitigating severe illness and deaths. Although China’s Zero Covid Policy has taken a massive toll upon the Chinese economy, China has no intention of following the West’s ‘living with the virus” approach. That’s bad news for China’s own economy and evidently for others too. This could have otherwise helped Mongolia revive its economy too.
During the first quarter of 2021, China started easing pandemic-related restrictions which, combined with increased private investment, led to the expansion of raw material exports. The Mongolian economy started to spring back soon before getting hampered because of Xi’s adherence to the “Zero-COVID” policy.
“The economic crisis owing to draconian measures to control the outbreak really shows the mess, miscoordination, and miscalculations by leadership at the top,” says Valerie tan, an analyst on Chinese elite politics for the Mercator Institute for China Studies in Berlin. “We’re finally seeing the full manifestation of this ideological turn by Xi Jinping,” the analyst further stated.
Still, it seems implausible for Beijing to abandon this stringent “Zero-COVID” policy anytime soon. “We are in a deep state of economic crisis,” Finance Minister Choijilsuren Battogtokh said during a national address last week, according to Bloomberg. “We may not be able to afford to finance salaries and operational costs of government departments.”
In addition to dampening economic growth, the Russia-Ukraine conflict has led to an increase in gas prices, adversely impacting the Mongolian currency—the Tugrik. While the Tugrik was declining against the US dollar since January, the trend got strengthened after Russia’s invasion of Ukraine late February. The owner of Credit Dash LLC, said: “Do you know what the selling price of a dollar is right now? We’re selling at about 3350 tugriks. If you’d asked me the same question a few months ago, I’d have said 2850 tugriks. Things aren’t looking so good for the Mongolia tugrik and the economy.” Depreciating Tugrik coerces Mongolians to use larger quantities of their weaker currency to buy expensive goods.
Protests in Ulaanbaatar
The deteriorating economic condition has also led to an uptick in civilian protests against the government. According to reports, in April, Mongolians gathered in front of the Sukhbatar Square in central Ulaanbaatar, and began protesting in front of the Parliament building. This demonstration was mainly led by young people, protesting against the state of the economy, particularly skyrocketing inflation. The protesters also demanded transparency and reduced government corruption.
The majority of Mongolians blame China for the status quo in the nation. Bataa, the owner of Arvijih Guur, a non-banking financial institution, stated, “Its China’s fault that there’s a shortage of goods in Mongolia. Prices have gone up too much. We should have more riots at Square.”
China, which has already come under heavy fire for orchestrating economic crises in nations like Sri Lanka, Pakistan and Laos, is the one behind the erupting economic jeopardy in Mongolia too. The currency crisis that Mongolia currently finds itself in is manufactured in China only.