Study On Trade Development And Investment Policy Between China And Mongolia

International trade is one of the important key factors for economic growth,financial stability and the development of a country.Mongolia is a landlocked country located between China and Russia.China and Mongolia share a border spanning across long kilometers and connected 12 trading border ports.Economic cooperation,foreign trade,and economic policies of neighboring countries,that is China and Russia,are influential in Mongolia.Since the 1990 s,Mongolia implemented the privatization reform while establishing the widely pattern of economic and trade cooperation between China and Mongolia.China became Mongolia's largest trading partner and the volume of bilateral trade is ascending every year.Since 2005,bilateral trade between China and Mongolia has sharply increased.During official efficiency meeting-on 21-22 August,2013,Chinese President Xi Jinping visited Mongolia and proposed an expansion in China-Mongolia trade approaching $10 billion by 2020.The two countries signed a joint declaration upgrading their relationship to a "comprehensive strategic partnership.The diplomatic relations were established on 16 th October 1949 and the agreement on friendly relations and cooperation was signed in 1994.Since 1953 several trade and economic cooperation agreements were made with the Government of P.R.China,which formed the basis for development of trade relations.In 2003 the bilateral relations and cooperation were determined by mutual consent as having reached the level of good neighborly friendly relations and trust.By introducing the trade development between China and Mongolia,this thesis analyzes the important factors of bilateral trade between China and Mongolia and puts forward some corresponding countermeasures to the existing problems,hoping to provide some benefits for the trade development between the two countries.Due to this reason,this study aims to analyze the important factors in promoting bilateral trade between Mongolia and China,and to solve recent problems and provide policy advise.The analytical instruments used Microsoft Excel,SPSS,SPSS AMOS,Eviews and some economic mathematical models such as such as path analysis,vector error correction model(VECM),Monte Carlo simulation,Bayesian analysis,principal component analysis(PCA),ARMA terms and revealed comparative advantage index(RCA)in the research.The structure of the thesis is as follows:Chapter 1 shows a background of the study,the history of trade between China and Mongolia and China-Mongolia-Russia economic corridor and One Belt One Road,objective and structure of study.China-Mongolia-Russia economic corridor and One Belt One Road will significantly have positive effect on the economy and trade flows.Chapter 2 contains the literature review of the bilateral trade between Mongolia and China on Chinese FDI,foreign currencies in Mongolian foreign trade and financial market and the influences on trade flows between Mongolia-China-Russia.The bilateral trade between Mongolia and China showed that China may play significant role on Mongolian foreign trade and economic growth.The relationships between trade flows,economic growth and FDI using time series analysis and have found a positive relationship in the long term.Chinese national currency,RMB may strongly impact on trade flows between China and Mongolia.Mongolia and China have opportunity to develop mutual economy and mutual ties in all sectors more to more.Chapter 3 presents the overview statistics and main economy policies of Mongolia and China related of foreign trade,the overview statistics divided four parts: the bilateral trade between China and Mongolia,Chinese FDI and bilateral trade between China and Mongolia,main foreign currencies(USD and RMB)in Mongolia and bilateral trade between Mongolia-China-Russia.The result led to conclude that,China and Russia have positive and significant influence on Mongolian foreign trade.Mongolian trade and openness policy significantly impacted the exports and imports of China and Russia.Foreign exchange rates(RMB and USD)may impact significant role on Mongolian economy and foreign trade.Mongolian and Chinese trade and FDI policies promote open door policy and it is impacted good influences on bilateral trade and attracting FDI to Mongolia.Chapter 4 investigates the influences of Chinese FDI on bilateral trade between China and Mongolia from 1995 to 2015.Run the empirical evidence which to use seven variables by Path analysis regression,the results illustrated the relationship between total trade with China and Chinese FDI in Mongolia is positive and a significant impacted.Moreover,relationship between growth and decline of Chinese FDI in Mongolia and total trade with China was observed as similarly correlated.Results of VECM demonstrated long run relationship between Mongolia's GDP,Chinese FDI and total trade with China.Chinese FDI to Mongolia and total trade with China were identified short-run.However,there was no short run relationship from GDP of Mongolia to total trade with China.Chapter 5 analyzes the role of exchange rate risk in bilateral trade between China and Mongolia.This part aimed to highlight the probability and the effects of conflict on risk of RMB/MNT and USD/MNT in trade flows between China and Mongolia.This study used the influences between these exchange rates and total trade with China.Applying Monte Carlo simulation,when there is growth of the volume of total trade with China;it leads to a increase in RMB/MNT.Conversely,when there is growth of the volume of total trade with China;it leads to a decrease in USD/MNT exchange rates.The posterior probability of Bayesian analysis,it provided evidence that when there is growth of the volume of total trade with China;it leads to a decrease in RMB/MNT and USD/MNT exchange rates.Conversely,when there is fall of the volume of total trade with China;it leads to increase in RMB/MNT and USD/MNT exchange rates.Chapter 6 presents aimed to highlight the effects of conflict in Mongolia on trade policy and openness,by estimating the trade flows with neighbor countries(China and Russia).Fourteen years'(2000-2013)data of Mongolian imports and exports were collected and gone through Principal component analysis(PCA)and empirical analysis for grouping various trades with China and Russia.Empirical analysis evidenced that,Mongolian trade and openness policy raised bilateral trade between China and Russia,leaving a great influence on economic size.Finally,the study focused on the forecasts from 2016to2018 to examine Mongolian's trade flows with China and Russia using ordinary least squares method(OLS)and ARMA terms.China-Mongolia-Russia trade flows will continue to dominate during the forecasted period.As shown by the structure of export and import,goods with China and Russia influenced the mutual trade amount.Chapter 7 shows the RCA index of agricultural raw material and ores& metals have very strong comparative advantage.As for RCA Index of food products have weak comparative advantage.Chapter 8 explores main summary and policy recommendations of thesis.China plays an important role on export and import of Mongolia and bilateral trade between Mongolia and China is increasing steadily from year to year.The revenue earned in mining is approximately 90% of the total exports of Mongolia that has a positive impact on economic development.China's trade flows play major and positive role in increasing GDP of Mongolia and population up standards.Due to neighborhood,Mongolia and China trade mutually can benefit from each other,in terms of supply of goods with minimal prices.