* China, Mongolia sign deals on mining, finance cooperation
* Xi tells Mongolians more cooperation will benefit both
* Struggling economy forces Mongolia to tilt towards China
(Recasts, adds China, Mongolia proposing summit with Russia)
By Terrence Edwards and David Stanway
ULAN BATOR/BEIJING, Aug 21 Chinese President Xi
Jinping proposed on Thursday the expansion of bilateral trade
with Mongolia to $10 billion a year by 2020 as he arrived for a
two-day visit aimed at deepening economic ties between the
Xi's arrival marks the first Chinese presidential visit in
11 years to Mongolia which has been hit by plunging commodity
prices and a rapid decline in foreign investment. It is keen to
agree to new deals on transport, energy and mining investment
with its dominant trading partner.
The two countries signed a joint declaration upgrading their
relationship to a "comprehensive strategic partnership". They
also signed agreements to cooperate further in areas such as
economics, energy, mining and finance.
"Xi proposes to expand China-Mongolia trade to $10 billion
by 2020," China's Xinhua state news agency said.
Two-way trade was worth $324 million in 2002 but rose to $6
billion in 2013, accounting for more than half of Mongolia's
total foreign trade, Xinhua said.
In an article written by Xi for Mongolian newspapers, Xi
said China would do all it could to help Mongolia develop.
"China hopes that both countries can push cooperation on
building inter-connecting railways and roads, the development of
mines and processing," Xi wrote.
China already buys more than 90 percent of Mongolia's
exports, mainly of coal and copper, and 49 percent of foreign
enterprises registered in Mongolia are Chinese, Xinhua reported.
But while the focus remains on economic cooperation,
persistent Mongolian worries about Chinese political hegemony in
the region make a bigger breakthrough unlikely, analysts said.
"I don't think right now is the time to talk about
breakthroughs in relations - the Mongolian economy is in a
difficult situation but it isn't difficult enough to have any
immediate impact (on relations)," said Sumati Luvsandendev, head
of the Sant Maral Foundation polling organisation.
Mongolia aims to use its mineral wealth to modernise its
isolated pastoral economy, but it has struggled to fund its
plans. A 2012 law aimed at restricting foreign ownership in
"strategic" sectors, since reversed, has also slowed foreign
investment, which fell 70 percent in the first half of 2014.
Mongolia's economy grew just 5.3 percent in the first six
months, slowing from 11.7 percent in 2013, official data showed.
Mongolia has previously sought to restrict Chinese firms
from taking control of its assets, blocking a stake bid by state
metals conglomerate Chinalco for the Mongolia-based
miner SouthGobi Resources.
But slowing growth could persuade the government to allow
greater Chinese involvement in its mining and infrastructure
sectors, the two pillars of its long-term plans.
"Balancing Russia and China and introducing the
participation of so-called third neighbours remains the broad
outline of Mongolian policy," said Neil Ashdown, senior analyst
with IHS Country Risk and Mongolia specialist. "What we are
seeing is a lean towards China at the present time, and the
clear reasons for that are the way the economy is going."
Mongolia is also keen to use China's rail network to deliver
coal and other minerals to other markets, and a transhipment
deal is set to be signed during Xi's visit.
"I think the most important deal we can get out of this
visit is a rail transit agreement," said Bontoi Munkhdul, chief
executive of the Ulan Bator-based Cover Mongolia consultancy.
"Allowing rail access to seaports in China would allow us to
export our commodities to other sea-borne Asian nations."
But while the deal could give Mongolia more options,
analysts expect the bulk of its coal and copper exports to be
sold to China for years to come.
The government in Ulan Bator has already agreed to form a
joint venture with state-owned Chinese coal giant Shenhua Group
to build a 13-km (8-mile) rail link that will help
deliver Mongolian coal across its southern border.
During a visit to China last year, officials said a working
group had been set up to build roads, railways and pipelines
that would turn Mongolia into a "transit corridor" linking the
Chinese and Russian economies.
China voiced support for a Mongolian proposal for a
trilateral summit with Russia to increase consultation and
cooperation among the three neighbours, Xinhua said.
Russia's President Vladimir Putin will visit Mongolia in
September, with more cooperation deals expected.
(Additional reporting by Ben Blanchard and Sui-Lee Wee in
BEIJING; Editing by Nick Macfie and Robert Birsel)