Stratfor on Asia.

Macdonald Stainsby mstainsby at
Fri May 19 22:40:04 MDT 2000

___The United States, China & the WTO
As the debate heats up in the U.S. House of Representatives over
free trade with China, President Jiang Zemin is calling for the
Communist Party to take a more powerful role in the country's
private businesses. Economic reformers have been marginalized.
Abroad, China pursues economic expansion, but at home its economic
policy is headed in the opposite direction.

A Shift in Asia, As Mongolia Stirs


In a far off and often forgotten corner of the world, Mongolia is
undergoing important changes. Nationalism is rising, and the
government is considering moving the capital out of Ulan Bator to a
historic seat of power - and potentially lucrative economic center.
The government faces a problem: a distinct lack of capital with
which to make these changes. If Washington seizes the opportunity,
it may gain a valuable strategic ally wedged between two great
powers, Russia and China.


Times are tough in Mongolia. The economy is shaky, the country's
social welfare system has collapsed, and drought has wreaked havoc
on livestock herding - a major source of livelihood. Difficult
financial times have been mirrored by a rise in nationalist
sentiments - which had been long buried by Soviet influence.

The Mongolian government is encouraging these attitudes and
debating whether to move the capital from the city of Ulan Bator to
Kharkhorin - the ancient capital founded by Ghengis Khan. But
making the move is time-consuming and expensive for a poor nation
of only 2.4 million - and surprisingly offers an opportunity for
the United States to expand its influence on the border of both
China and Russia.

Mongolia's economy is still struggling a decade after the end of
communist rule. Privatization efforts have benefited only a small
slice of the population. Unemployment is officially low; the CIA
estimates that about 5 percent of the population is jobless, but
that number is misleading since many who lose their jobs simply
rejoin their rural relatives and are counted as herders. A more
illuminating measure of the country's economic condition can be
found in the 40 percent poverty rate. In 1999, a U.N. study found
that half the population goes hungry.

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Yet at the same time, Mongolia's culture is enjoying a resurgence
after nearly being erased by 70 years of socialism. Buddhism is
popular again, and the national dress is back in fashion. Ghengis
Khan is once again the national hero. Tapping into nationalist
currents by moving the capital to the ancient seat of the Mongol
Empire is an easy way for the government to score political points.
Of course, the move won't take place tomorrow. The South China
Morning Post reports that the parliament is talking about starting
the move in 2020.

It may take 20 years to bring Kharkhorin up to speed. It is a place
where travel writers brag about needing to cut chopsticks from
firewood. The population is only around 15,000 and much of the
ancient city was destroyed to construct the nearby Erdene Zu Hiid
Buddhist monastery in 1586. All that remains is a handful of
Soviet-era buildings. The Mongolian government would need to invest
massive amounts of resources into building infrastructure like
roads, telecommunications and an airport. This is difficult for a
country where the per capita Gross Domestic Product (GDP) is little
more than $400 a year.

On the bright side, a massive public works project like this would
do a lot for Mongolia's economy - the government's real problem.
The only obstacle is a big one: money.

The solution might come from Washington. The U.S. government has
started to take interest in Mongolia, no doubt due to its long
borders with both China and Russia. Mongolian nationalism is by
definition opposed to Russia, which controlled the country during
much of the Cold War. Nor does nationalism improve relations with
Beijing - any respectable Mongolian historian will tell you that
Manchurian invaders from China ended the Mongol dynasty in the 14th

The United States is taking small and, so far, unnoticed steps
toward filling the strategic void. The proposed defense budget for
fiscal year 2001 includes a new addition: $2 million to finance
communications equipment for Mongolia's border patrol. This would
represent half of the military financing for all of Asia. The
amount of cash may seem small, but it's significant for the 10,000-
member Mongolian military. Additionally, the World Bank - which is
run by an American and primarily financed by the United States -
just loaned $32 million to Ulan Bator.

The United States seems to have all but abandoned the Central Asian
states - but Mongolia may help fill the gap. Long borders, a need
for cash, and poor relations with its neighbors make it a promising
place for the United States to expand its strategic interests in

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(c) 2000 WNI, Inc.
Macdonald Stainsby
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