Soviet troops ostensibly were withdrawn in March 1925 (although some historians have debated whether all actually departed). Despite the treaty--between the Soviet Union and China--that acknowledged Outer Mongolia as an autonomous, but integral, part of China, the Soviet Union explicitly recognized Mongolia's independence of China in internal affairs and its ability to pursue an independent foreign policy. While continuing its cautious relationship with Beijing, Moscow made it clear that it would permit no Chinese encroachment on Mongolia. Mongolia's general foreign policy line was based on strong ties with the Soviet Union, "the reliable pillar of [Mongolia's] independence and prosperity" according to the party line.

Under Moscow's guidance, the leftist leaders of Mongolia began to strengthen their still-weak position. The Mongolian communists, with Comintern help, gradually undermined the rightist elements in the Mongolian People's Revolutionary Party and attacked the power of the two great institutions that had dominated Mongolia for centuries: first the nobles then, the abbots (whose monastic followers comprised at least one-third of the adult males). In this period of cautious consolidation, the party abolished the aristocracy's feudal privileges, a reform which had the initial effect of influencing wealthy nobles to embark on capitalist ventures, such as investing in the new cooperatives. Gradually, however, the revolutionaries built a state-guided economy supported by Mongolian cooperatives and by Soviet trade.

Moscow's economic hold on Mongolia tightened as exports to the Soviet Union rose rapidly from about 14 percent of Mongolia's total production (chiefly livestock and animal products), in 1923 to 1924, to 85 percent, in 1928 to 1929. By 1929 Mongolia's imports lagged far behind its exports. Aside from the provision of technical and political advisers, Soviet trade policy did not yet provide for economic development aid to newer socialist countries as had been envisioned by Lenin in 1920.

Other areas of the economy showed more progress. The Mongolian National Bank, established in 1924 as a joint Mongolian-Soviet company, issued the tugrik, the new national currency, as part of monetary reform. The cooperative movement, directed by the Mongolian Building Cooperative, began to show impressive results. A standardized tax system was instituted, and other administrative reforms slowly took hold. The army, equipped and trained by the Soviets, was steadily growing and improving (see The Mongolian Army, 1921-68 , ch. 5). The government refrained from a direct attack on the venerated religious establishment, but some higher-level monks were imprisoned and executed.

Although the Mongolian communists had not yet overthrown the conservatives in the government and the economic sectors during this period, they had gained progressively in strength as evidenced by the changes they had made in society (see So360 Society , ch. 2). Slowly, the young Soviet-taught Mongols were taking over the political, the military, and the economic apparatus. Many nobles retained their wealth, however, and the number of monastics actually increased between 1925 and 1928. Nearly 90 percent of all trade was controlled by Chinese firms in Mongolia. The Fourth Party Congress (September 1925), the Fifth Party Congress (September 1926), and the Sixth Party Congress (September 1927) had witnessed policy struggles between leftist and rightist elements that presaged the victory of the left.

Data as of June 1989