With Chinese president Xi Jinping's visit to Mongolia, the economic cooperation between the two countries is increasing. China and Mongolia’s coal gasification project has drawn a lot of attention. However, ANBOUND research team doubts whether it will be successfully carried out. Coal gasification program consumes a huge amount of water, while Mongolia is short of water resource. Finding a way to guarantee water supply is the key to success. What’s more, this coal gasification program is actually competing with the natural gas contract signed by China and Russia before. Mongolia and Russia have become rivals. Thus, Russia may not allow the north-south water transfer of Mongolia to solve the water shortage problem.