Mongolia's white-hot economic growth has cooled this year as the ripple effects of the global economic downturn -- and especially slowing Chinese growth -- start to hit home.

Resource-rich Mongolia defied the global economic gloom to notch stunning 17.3 percent GDP growth in 2011 on soaring coal shipments to its energy-hungry giant neighbour and a surge in foreign investment in its minerals sector.

But growth eased to 13.2 percent in the first half of this year, and while that is still among the world's highest rates, questions are being asked about its heavy dependence on coal exports to China, where economic growth is slowing.

Mongolian coal exports have leapt in recent years on voracious Chinese demand, and grew 27.5 percent in 2011 to 21.3 million tonnes, according to government figures, nearly all of it going across its southern frontier to China.

But China's usually turbo-charged growth rates have slowed significantly this year, sapping coal demand, contributing to a 10-15 percent decline in Mongolian coal prices this year and trimming the country's coal export projections.

"We are now hoping that we can equal last year's export numbers, but it's unlikely that we'll be able to beat those figures," said Damjin Damba, president of the Mongolian National Mining Association.

Ninety-two percent of the country's total exports go to China, according to Mongolian government data, and nearly all of that consists of coal.

But economic growth in China slowed to 7.6 percent in this year's second quarter, the weakest performance in three years.

David Paull, managing director of Australia-based Aspire Mining, said Mongolia has been squeezed by seasonal weakness, softer Chinese demand and a pending leadership change in Beijing.

Some analysts have said the coming leadership transition is delaying expected Chinese economic stimulus moves.

"So there is a grouping of events that are compounding the issue," Paull said.

Domestic issues also have chilled the investment surge, including the parliament's recent adoption of a foreign investment law that tightens approval requirements for foreign companies seeking to do business in "strategic" sectors such as minerals.

In the run-up to a Mongolian election in June, campaign calls for the nationalisation of natural resources created further uncertainty that hurt sentiment.

Meanwhile, in late June, SouthGobi Energy Resources (SGR) announced it had suspended its operations at Ovoot Tolgoi, one of the premier coal producers in the country.

SGR's former CEO Alexander Molyneux said operations were halted due to a licence suspension by the government and failure to give other permits.

SouthGobi had been the target of a takeover by China's biggest aluminium producer Chalco, raising speculation that the government had moved to prevent Chinese control of Ovoot Tolgoi.

Landlocked Mongolia is sandwiched between Russia and China, and its proximity to the fast-growing Chinese economy has been a huge plus when coal markets are bullish.

But the slowdown is stoking discussion over how to spur development of other industries such as wool production and tourism in order to diversify.

"We are talking a lot about what kind of industry can be a better option to mining if we want to diversify our economy. Whether it is tourism or manufacturing, we want 'mining boom' to be changed to 'mind boom'," said Oyungerel Tsedevdambaa, Mongolia's tourism minister.

There are plans for a $10-billion industrial park in the city of Saishand and the government is considering building a $3-billion rail network to Russia that could open access for Mongolian goods to ports in Russia's Far East, and on to overseas markets.

Ramping up shipments of copper -- of which Mongolia also has significant deposits -- is seen as another possibility.

Mongolia exported 575,900 tonnes of copper concentrate in 2011, 97 percent of which went to China, and growing Chinese copper needs are being viewed as a potential lucrative future market.

This is especially so with the multi-billion dollar Oyu Tolgoi copper and gold mine due to begin operations later this year and likely to push copper exports up.

Coal can be susceptible to seasonal and other cyclical swings, while copper demand typically remains steady, said Eric Zurrin, director of ResCap, a boutique investment firm based in the Mongolian capital Ulan Bator.

"Coal is cyclical but copper has a long-term stabilizing effect," he said.