President Xi Jinping and his Mongolian counterpart, Tsakhiagiin Elbegdorj, signed a joint declaration yesterday to upgrade the bilateral ties of the two countries to a comprehensive strategic partnership.
The two leaders also oversaw the signing of agreements to boost bilateral cooperation in sectors, including infrastructure, economics, and energy, Chinese state media reported. Mongolia would also be allowed to use sea ports in north and northeast China, Xinhua said.
Previously, China's resource-rich neighbour was simply China's strategic partner.
Xi arrived in Ulan Bator yesterday morning for a two-day state visit to Mongolia. Mongolian Prime Minister Norov Altankhuyag and Foreign Minister Luvsanvandan Bold greeted Xi and first lady Peng Liyuan at the airport in the rain.
During yesterday's meeting with the Mongolian president, Xi said China was keen to boost the cross-border transport and cooperation in mining and new energy sectors with Mongolia.
"I hope China and Mongolia will become close neighbours and friends with mutual trust," state media quoted Xi as saying.
He added that China would support Mongolia to join the Asia-Pacific Economic Cooperation forum. By doing so, China was trying to counterbalance the impact of the United States, said Zhang Jianrong, a Central Asian affairs specialist at the Shanghai Academy of Social Sciences.
Xi's visit is the second time he has visited only one nation on an official tour. This year is the 65th anniversary of the start of diplomatic ties between the countries.
Xi is due to meet Altankhuyag again today and give a speech at the Great Hural, Mongolia's parliament, Xinhua reported.
China has been Mongolia's top source of foreign investment and its biggest trade partner. China buys 89 per cent of Mongolian exports, says the CIA's World Factbook. Bilateral trade between them has increased 17-fold over the past decade to US$6 billion and made up almost half of Mongolia's total foreign trade, Xinhua reported.
The landlocked nation lies between Russia and China. In recent years its economy has grown strongly thanks to demand for its resources, but expansion has slowed amid falling coal prices and foreign investment.
Xi also highlighted on his visit that Beijing backs Ulan Bator over its planned Ulaanbaatar Dialogue, an initiative to build confidence and peace through dialogue in northeast Asia.
Zhang said Xi's trip was part of Beijing's effort to boost ties with its neighbours.
"Mongolia has been wanting to boost its economy in recent years," he said. "For China, it is getting more important to improve relations with its neighbours; Mongolia is one of them."
Additional reporting by Agence France-Presse