Mongolia in the shadow of the great powers: The role of third neighbour policy in economic transformation

Motivation: The article examines Mongolia’s foreign economic strategy as a case of a small state navigating structural dependence on a dominant economic partner. The motivation for this study arises from the coexistence of two interrelated conditions: Mongolia’s democratic political system and its high degree of economic concentration, particularly its reliance on coal exports to the People’s Republic of China. At the same time, the Mongolian government has articulated an ambitious long-term development agenda (Vision 2050) aimed at economic diversification and energy transformation. This combination raises the question of how a structurally dependent economy can pursue policy autonomy in the face of asymmetric interdependence.Aim: The aim of the article is to identify and analyse the mechanisms through which the ‘Third Neighbour’ Policy operates as a tool for mitigating Mongolia’s economic and infrastructural dependence on China. The study focuses on the political economy dimension of Mongolia–China relations, interpreted through the lens of structural dependence and neocolonial dynamics, while examining how partnerships with selected third countries contribute to diversification efforts. In particular, the article seeks to operationalise the concept of the ‘Third Neighbour’ by identifying which external actors play a measurable role in Mongolia’s economic transformation.Materials and methods: The study employs a mixed-methods approach combining qualitative and quantitative analysis. The empirical material comprises diplomatic documents, government strategies, economic reports, and statistics on foreign trade and investment. The concept of the ‘Third Neighbour’ is operationalised primarily through foreign direct investment (FDI), understood as a measure of long-term economic commitment and investor confidence that is less directly conditioned by geographic proximity and infrastructural constraints than trade flows or transit-based indicators. This enables the identification of external actors whose engagement in Mongolia extends beyond transactional exchange and reflects a sustained strategic interest. FDI-based analysis is complemented by data on imports and ownership structures in the mining sector in order to contextualise investment patterns within Mongolia’s broader trade dependence and resource governance framework. The analytical framework draws on realist and liberal approaches to international relations, supported by official Mongolian policy documents, including Vision 2050 and Mongolia’s foreign policy strategy, as well as international financial and statistical databases.Results: The analysis demonstrates that Mongolia’s dependence on China is primarily shaped by export concentration and infrastructure linkages rather than by foreign ownership of strategic resources. At the same time, the findings indicate that the ‘Third Neighbour’ Policy functions as a polycentric strategy based on diversified investment, development assistance, and sectoral cooperation rather than on a single alternative partner. While this strategy does not eliminate Mongolia’s structural dependence on the Chinese market, it creates limited but tangible avenues for economic diversification and policy flexibility within the constraints imposed by geography, infrastructure, and global energy trends.