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TheStreet Open House

For Mongolia, China's Too Close For Comfort

Stocks in this article: ACH

Coal country is where Mongolia's balancing act is put to the test. Chinese demand for copper and especially coal has propelled the Mongolian economy to one of the world's fastest growing, making some wealthy and driving down poverty in a still poor country, and China wants a larger share of the resources.

Tsogttsetsii, the county seat closest to Mongolia Mining Corporation's coal mine and the planned railroad, bursts with activity. A new airport and apartment complexes rise out of the empty, tawny Gobi. Trucks full of coking coal veer off a company-built paved road to the Chinese border to avoid potholes, crushing tufts of grasses herds of camel and goats feed on.

On the Mongolian side of the border squat a few blocky concrete buildings for guards. Across the fence, the Chinese city sprawls and gleams, tangible reminders of how much richer Mongolia might be if fully open to China. "There are more buildings. There's more construction. It's more developed. The landscape is nicer," said Dizaibadiin Luvsandorj, a gaunt former Buddhist monk-turned-coal hauler who makes the trip every week or so. Still, he doesn't like to stay on the Chinese side, he said, because "food is expensive."

Nowhere else does China's footprint loom so large yet seem so faint. Even in totalitarian, hermetic North Korea, Chinese road-building crews string banners of Chinese characters along the construction sites.

In Cambodia, where trade with China has nearly doubled from 10 percent of GDP in 2006 to 19 percent in 2011, and Chinese investments run from rubber plantations to telecommunications, the government has done Beijing's bidding. It sent back ethnic Uighurs seeking asylum. This July, it squelched an attempt by Southeast Asian allies to use an annual forum to pillory Beijing for its expansive claims to disputed South China Sea islands.

China's presence became so intrusive in Myanmar, also known as Burma, that it incited a backlash. A military-led government counted on China for investment and diplomatic protection during two decades of Western sanctions. Trade with China hovered around 10 percent of GDP, not including widespread smuggling. Chinese companies have been so busily extracting timber, gems, oil and gas that locals complain "China is using Burma as a supermarket." In the city of Mandalay, a real estate rush by Chinese has priced locals out of the market. Alarmed by the onslaught and the outcry, the government moved away from Beijing last year, taking steps toward democracy.

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