Hard graft … Chinese workers on a Mongolian construction site. Legal Chinese workers have been estimated at 80,000. Photo: AP

THE EAST IS RED

ON A hill overlooking Ulan Bator, a young businessman lowers the volume on his car's CD player to explain why China's diplomatic "charm offensive" is failing so badly in Mongolia.

Amar (his full name is Amarbayasgalan) runs a small trading company that imports all manner of goods from China. He personally knows "some good Chinese, some bad", but this nuance is not widely shared among his friends.

He points to the crop of multi-storey buildings rising out of construction sites in the valley below. They are full of Chinese workers, he says.

We drive past one site that has just become Mongolia's tallest building, tentatively called the Shangri-La office centre. Its 17 floors overlook the capital city's main square, Sukhbaatar Square, named after a national hero who invited the Soviet Red Army to "liberate" his people in 1921.

The site, controlled by a local conglomerate called MCS, is surrounded by a 2½-metre-high fence of corrugated iron and we cannot peer in.

We have better luck down the road at MCS's headquarters. "Yes, we have Chinese workers," says its deputy director, Enkhtsetseg (who, like most Mongolians, goes by a single name).

"They work on site in two 12-hour shifts, seven days a week. They are the fastest workers I've ever seen. The buildings grow like mushrooms."

MCS has subcontracted Beijing Construction Engineering Group which, in turn, has engaged a labour-hire firm from China's Anhui province to bring in workers. BCEG has also won other prime contracts, including one for a Hilton hotel, and appears to be the biggest builder in Ulan Bator.

Enkhtsetseg phones the Shangri-La site and tells her managers to let us in. Inside, Chinese workers in hard hats are busy erecting interior walls and hanging mirror glass on the exterior. On the second floor we approach a tall bricklayer, Wu Qingyi, who is taking a break on a plank of wood.

Wu, 51, arrived with his bricklaying team from Beijing two months ago. He says he toils from 6.30am to 6.30pm, with a two-hour lunch break, seven days a week. He gets three simple meals a day and a bunk with a wooden mattress in a cabin shared by seven other Chinese workers.

At the end of the year, when Mongolia freezes over, he will receive a bulk payment of 3000 yuan ($471) for each month worked. Then he will return to his wife and two children in Beijing who, he says, understand that he needs to travel to provide for them.

His working conditions appear to fall far short of Mongolia's labour standards.

Do his bosses treat him well? "Not too good, not too bad," he says, adding that he would appreciate a little more meat with his rice, steamed buns and stir-fried vegetables. Does he like Mongolia? "It's fine", he says, but he cannot say what he likes about the place, because "I have not once left the construction site".

Wu says he has not ventured outside since he arrived 10 weeks ago because he does not speak Mongolian and he is too busy working. It is not clear whether his isolation is company policy or personal choice. Others speculate that it is a safety precaution, given local animosity directed at people like him.

Whatever the reason, the Shangri-La construction site is almost hermetically sealed from the Mongolian economy.

"A Mongolian company mixes the concrete but the cement, the steel, the formwork, the glass, the furnishings, the machinery, the generator, the filter units - they will all come from well-known brands made in China," says Li Xingfeng, a personable engineer and quantity surveyor from Beijing, "and, of course, the workers are from China."

An MCS supervisor, Oyunbileg, chips in: "We do employ some Mongolians to connect the electricity and pipes from outside, but mainly they assist the Chinese workers in unloading the trucks and carrying things."

Li and Oyunbileg say there are about 450 Chinese workers on site. Soon new labour teams will arrive from China for the interior design work. This should use up the quota of 600 Chinese workers allocated by the Mongolian Government, with the Government receiving a large tariff for each worker.

It is impossible to say how many Chinese temporary workers are constructing buildings, building roads, planting crops and scouting for minerals across the country. Mongolia has a porous border and a corruption problem.

"This summer we think there are about 80,000 legal Chinese workers," says MCS's Enkhtsetseg, which would equate to about 8 per cent of Mongolia's total labour force, "and there are so many companies bringing in illegal Chinese workers."

Tuvshintsegel, a Mongolian migration lawyer who is doing a doctorate on the subject, speculated that illegal Chinese workers outnumber legal ones.

The Department of Immigration was not interested in talking about immigrant workers but a lower-level official was happy to check the number of Chinese who had become Mongolian citizens this year. "It is a top secret," she said with an ironic smile after asking around. "There are 11."

It says something about China's extraordinary inequalities, as well as its astonishing competitiveness, that it can export tens or perhaps hundreds of thousands of workers to a country whose average per capita income is half its own.

Their presence is fuelling an already toxic concoction of racism, historical grievance, Chinese insensitivity and, above all, a pervading fear of economic annihilation.

The Mongolian National Museum devotes only a couple of small exhibits to the 200 years of Manchu-Chinese rule that ended in 1921. The wall plates describe merciless exploitation by Chinese merchants and brutal government suppression.

Mongolians were asked in survey in a November 2005 to pick two preferred "foreign partners" for their country: 44 per cent said the United States, 61 per cent said Russia and only 14 per cent nominated China.

There aren't many former Soviet satellite states where "liberation" still describes the arrival of the Red Army, rather than its departure. The Russians may have paralysed the economy and all but destroyed Mongolia's religious, intellectual and political elite, but they booted out the Chinese.