Evolving from a transit route to becoming an economic hub

At a warehouse in Hulunbuir, the Inner Mongolia autonomous region, a foreign trade company has stacks of premium lamb ready for exports. Exporting whole carcasses actually brings in modest returns, while if the meat is broken down into Western-style prime cuts and packaged under a branded label, its value can double.

Yet, surprisingly, many enterprises in the region fail to cash in on this simple truth. Not because they lack the capability, but because they have grown accustomed to the old habit of shipping raw materials. The same story plays out again and again in timber, ore, and cashmere.

How can Inner Mongolia's exports sector break free from the trap of simply shipping out raw commodities without capturing real value?

During the 14th Five-Year Plan (2021-25) period, Inner Mongolia's foreign trade volume experienced robust and impressive growth, rising from 123.08 billion yuan ($18.22 billion) in 2021 to 220.67 billion yuan in 2025, an increase of 79.3 percent. Exports alone surged from 47.52 billion yuan to 89.87 billion yuan, an 89.1 percent rise. This exports dynamism has become an increasingly vital engine for regional economic growth.

By 2025, Inner Mongolia's exports sector had achieved remarkable results. In terms of market presence, the region traded with 199 countries and regions — an increase of 11.8 percent from the year before — with exports to South America, the European Union and Africa continuing to expand, reflecting the growing success of its multi-market diversification strategy.

At the same time, traditional partners such as Russia and Mongolia still account for a substantial share of exports: combined, trade with these two neighbors makes up more than half of the region's total foreign trade, underscoring the enduring trade dynamic.

On the exports front, mechanical and electronic products, agricultural goods, basic organic chemicals, steel, and labor-intensive manufactured items together generated 57.54 billion yuan, accounting for 64 percent of the region's total exports — forming the backbone of Inner Mongolia's export mix.

That same year, high-tech product exports grew by 24 percent, while processing trade exports surged by 226 percent, a sign that value-added activities and extended industrial chains are beginning to gain traction.

In terms of export players, the region was home to 3,987 foreign trade enterprises actively involved in import-export practices in 2025, a year-on-year increase of 13.1 percent. Private enterprises were particularly dynamic, numbering 3,813 and generating 75.03 billion yuan in exports — 83.5 percent of the region's total — making them the undisputed engine of Inner Mongolia's foreign trade growth.

On the platform side, the China-Mongolia Erenhot-Zamyn-Uud Economic Cooperation Zone was officially approved and put into operation in 2024. The comprehensive bonded zone saw its trade value climb from 6.66 billion yuan in 2021 to 27.61 billion yuan in 2025; bonded logistics centers saw its trade value soar from 15.16 billion yuan to 45.12 billion yuan over the same period; and cross-border e-commerce transactions grew from 450 million yuan to 4.68 billion yuan.

Across the board, these open platforms have continued to upgrade; port infrastructure has been steadily improved; and the region's role as a key logistics hub has grown stronger, laying a solid foundation for Inner Mongolia to further integrate into global supply chains and build a new, more open economic system.

Behind the impressive numbers, however, lie deep-seated concerns. In the broader landscape of China's foreign trade, Inner Mongolia's export volume still falls noticeably short of what its strategic position would suggest.

More troubling are the entrenched structural weaknesses: resource-based primary products continue to dominate the export mix, the share of processing trade remains far below the national average, and the region's role as a mere transit passageway for ports leaves Inner Mongolia with little stake in the value added along the supply chain. Taken together, the bottlenecks constraining the high-quality development of Inner Mongolia's export trade can be grouped into five broad categories.

First, there is the risk of over-reliance on a single market and a narrow product mix. As of 2025, trade with Russia and Mongolia accounted for 50.4 percent of the region's total imports and exports, with exports alone making up 28.2 percent. Such heavy dependence on traditional neighbors and resource-based goods leaves the region acutely vulnerable to external shocks, a fragility that must be addressed in order to move up the growth ladder.

Second, the challenge of transit without value addition in local processing remains a pressing issue. A significant share of imported minerals, timber, and other resources passes through Inner Mongolia either in raw form or after only minimal processing before being re-exported, with much of the value-added activities taking place elsewhere. This pattern drains tax revenue and employment opportunities from the region, locking it into the lower rungs of global value chains.

Third, it is still challenging to convert high transit volume into local economic benefits. In 2025, Inner Mongolia handled 8,612 China-Europe freight trains, accounting for 47.5 percent of the national total. Yet despite its strategic advantages as a national-level port and a key node on the China-Europe rail network, the region lags behind peers such as Xinjiang Uygur autonomous region and the Chengdu-Chongqing economic circle in translating logistics throughput into trade growth and industrial clustering.

Port functions remain heavily focused on customs clearance and freight handling, with little development of higher-value activities such as manufacturing, financial services, or supply chain management. The trains largely pass through the region, generating limited spillover for the local economy.

Fourth is the "small cart, big load" problem of weak export players. In 2025, fewer than 4,000 enterprises in Inner Mongolia were actively engaged in foreign trade — a number that seems disproportionately small given the region's 132 million metric tons of port freight and its handling of nearly half of all China-Europe rail traffic.

Most of these players are small trading companies focused on agency businesses or small-scale proprietary operations, lacking their own brands or international marketing networks. As a result, they have limited bargaining power in global trade and see their margins squeezed accordingly.

In 2025, there were 3,813 private enterprises in Inner Mongolia, with a total import and export value of 180.57 billion yuan, accounting for 81.8 percent of the region's total foreign trade value. This represents a significant gap compared to the per-enterprise scale of coastal regions, where figures often reach hundreds of millions of dollars.

Fifth, many of the region's open platforms — be they non-ferrous metals, new energy equipment and agricultural and livestock products — suffer from overlapping mandates and a lack of distinct focus, with limited integration into Inner Mongolia's distinctive industries. This makes it really difficult to generate incremental export growth driven by processing trade and higher-value manufactured goods.

Meanwhile, the policy advantages of comprehensive bonded zones have yet to translate into meaningful industrial clustering, and coordination among these zones, industrial parks, and logistics hubs remains weak.

The way out of this predicament lies in a fundamental reorientation: shifting from a transit-based economy to a value-retaining one. This is not merely an industrial upgrading imperative; it is a strategic necessity if Inner Mongolia is to redefine its role in China's broader opening-up landscape.

A major push for local processing capacity is essential. To meet the 2026 target of adding at least 3 million tons of local processing capacity and achieving a local processing rate above 50 percent, the region should develop dedicated deep-processing zones at key ports such as Manzhouli, Erenhot and Ganqimaodu.

These zones need to focus on coal washing, timber processing, grain and oil refining, and non-ferrous metal smelting, while exploring innovative models such as bonded processing, bonded R&D, and bonded maintenance.

Simultaneously, pilot supply-chain collaborations should be launched between primary processors at the ports and deeper manufacturing facilities in the hinterland, with one or two pairs of enterprises selected within the region's three priority linkage corridors, including the Ulaanqab-Erenhot axis.

Expanding international market access and building a strong brand presence are critical to moving up the global value chain. Priority sectors, such as high-end cashmere products and premium meats, should draft their tailored brand development plans.

At the same time, local firms should be encouraged to align with green trade standards in demanding markets such as the European Union, the United States, and Japan.

The Beijing-Inner Mongolia cooperation platform is a useful channel for introducing premium agricultural and livestock products to the Beijing market and, from there, to global buyers through the capital's international networks.

Beyond traditional markets, active exploration of Central Asia, Central and Eastern Europe, and Southeast Asia should proceed under a coordinated initiative to help Inner Mongolia brands go global, shifting the region's export narrative from selling raw materials to selling brands and standards.

The region must enhance its ability to transform transport corridors into true economic hubs where goods are not merely moved but traded, priced, and financed.

Accelerating the development of national logistics hubs in Hohhot, Manzhouli, and Erenhot, combined with a robust multimodal transport network, will lower overall logistics costs.

More importantly, the ports need to host advanced supply chain services such as bonded futures delivery, spot commodity trading, and supply chain finance, ensuring that transactions and price discovery occur locally. A digital cross-border trade platform would further improve the efficiency of value capture from the region's transit volumes.

Strengthening and enlarging the pool of foreign-trade enterprises is vital for unlocking innovation in new trade formats. International marketing networks should be built through mergers, acquisitions, brand purchases, and overseas warehouse deployments.

In the e-commerce space, a strategy linking online platforms with industrial clusters and overseas logistics should be pursued, with targeted policies to attract leading cross-border platforms to set up regional operation centers in Hohhot, Chifeng and Ordos, while nurturing home-grown e-commerce players.

The region should also pursue high-standard pilot free trade zone development. Drawing on successful models elsewhere, pilot innovation zones could be launched in key open areas, including the Hohhot-Baotou-Ordos-Ulaanqab, replicating institutional innovations in customs clearance and trade finance.

Closer integration between the free trade zone and existing platforms would create a cohesive system. To drive this forward, one or two well-prepared zones should be empowered to conduct stress tests of differentiated institutional innovations, generating a set of policy experiments tailored to Inner Mongolia's specific industrial strengths and development needs.

Inner Mongolia's export trade now stands at a critical inflection point, where the imperative is shifting from sheer scale expansion to genuine quality upgrading.

For years, the region has successfully plugged itself into global value chains, leveraging its geographic location and resource wealth. Yet that integration has come at a cost: it has largely confined Inner Mongolia to the lower tiers of the value chain, where margins are thin and leverage is scarce.

Looking ahead, the core mission of high-quality development is to move from mere integration to meaningful upgrading, from serving as a transit corridor to functioning as a true economic hub, and from a pass-through economy to one that retains and captures value.

The road ahead will not be smooth. It will require dismantling entrenched path dependencies, breaking down bureaucratic silos and local parochial interests, and demonstrating genuine courage in pursuing institutional innovation.

There are no shortcuts, and no easy victories. But this is a journey the region must undertake, because only by building a value-retaining economy can Inner Mongolia convert its geographical advantage into lasting developmental strength.

Only then can it truly serve the nation's strategy of opening up to the north, while ensuring that the dividends of that openness flow not just through the region, but directly to the communities and people who call the steppe their home.

The author is the vice president of Inner Mongolia University of Finance and Economics.

The views don't necessarily reflect those of China Daily.

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