AUTHOR: Munkh-Ulzii Batmunkh, Zolzaya Oyunbyamba, Nasanbat Enkhtug
PUBLISHED IN: Volume 6 Issue 2
KEYWORDS: Mongolia; Foreign Trade; Economic Growth; Third Neighbor Policy; China; Russia; Trade Diversification; International Relations; Econometric Analysis; Small-State Strategy
ABSTRACT
This study investigates the economic impact of Mongolia’s foreign trade structure, focusing on the relative contributions of its two neighbors – China and Russia – and its designated third-neighbor partners within the framework of the Third Neighbor Policy. Using annual data from 2005 to 2025 and employing correlation analysis, regression modeling, and theoretical interpretation, the study reveals a pronounced imbalance in Mongolia’s trade-growth relationship. The findings show that Mongolia’s economic performance is driven primarily by exports to China, with Russia exerting influence mainly through energy-related trade balances, while most third-neighbor countries exhibit weak or inconsistent economic effects. Only Japan demonstrates a statistically significant export-related impact, and a few partners, such as South Korea and Turkey, show positive contributions through trade balance improvements. By contrast, trade deficits with Australia and the European Union are associated with negative growth effects. Regression results with global trade indicators confirm that total exports and imports significantly enhance GDP growth, underscoring the importance of broad trade openness in Mongolia’s development trajectory. The study concludes that although the Third Neighbor Policy is diplomatically valuable, its economic influence remains limited and uneven due to structural geography, logistical barriers, and the small scale of thirdneighbor trade. The paper recommends strengthening high-impact third-neighbor partnerships, reducing export dependence on China through value-added sectors, modernizing trade infrastructure, and aligning economic diplomacy with measurable targets. Findings offer theoretical and empirical insights into how Mongolia can enhance its economic security and strategic autonomy through more targeted trade diversification.
DOI: https://doi.org/10.65194/IJBI-2026-1007
