China Expands Strategic Presence in Israel
Spending Targets High-Tech, Industry, Infrastructure
Mar. 1, 2014 - 11:20AM | By BARBARA OPALL-ROME
TEL AVIV — China is building a strategic presence in Israel through a growing portfolio of holdings in national infrastructure, high-tech startups and core industries.
With state financing, surging investment and the support of the Israeli government, Chinese public institutions and private investors are acquiring control of key industries and gaining unprecedented access to Israeli technology, innovation and know-how.
Lured by China’s vast market and diplomatic clout with its UN Security Council seat, Israeli Prime Minister Benjamin Netanyahu has assigned top priority to expanding links with Beijing.
“Our strengths complement one another. China has massive industrial and global reach. Israel has expertise in every area of high-tech,” Netanyahu said at a joint press conference in Jerusalem with Chinese Foreign Minister Wang Yi.
Since Yi’s mid-December visit here, Netanyahu has publicly flagged relief from export licensing restrictions as an essential step his government is taking to expand cooperation and trade.
Israel’s National Cyber Bureau plans to include China in a Cyber Emergency Response Team to be stood up next year.
China is a lead contender for a megaproject to connect the Mediterranean coast to the Red Sea by high-speed rail with its proposal to build, operate and transfer the network with significant state financing.
Estimated to exceed US $8 billion, the twin-track railway would traverse tunnels and bridges, with a direct stop in Beersheba, the planned epicenter for Cyber and intelligence.
An Israeli government decision is expected by the end of the year. If tapped for the job, it will fortify Beijing’s footprint here for decades as a strategic alternative to the Suez Canal.
Netanyahu views the so-called Red-Med project as a way to strengthen Sino-Israeli ties, given Beijing’s heavy reliance on sea routes.
“A significant portion of [Chinese shipping] passes through the Suez Canal, and we are building a valve in the form of a train,” Netanyahu said in a late January conference address here.
In less than four years, Beijing has amassed a controlling interest in Israel’s agrochemical industry with a $2.4 billion investment by China National Chemical Corp., and access to Israeli nanotechnology through a joint research center to be operated by Tsinghua and Tel Aviv universities.
It also stands to benefit from a $130 million endowment for the Guangdong branch of the Technion Institute — Israel’s national brain trust — courtesy of Li Ka-Shing, a Hong Kong billionaire.
Prominent private-sector deals include last year’s $240 million acquisition of an Israeli laser firm by a subsidiary of Shanghai-based Fosun International, and the prospective sale of Tnuva, a symbolic nationwide dairy concern forged from Israeli kibbutzim.
As for high technology, China ranks a close second to the US in the number of projects co-managed by Israel’s Chief Scientist Office.
Officials here say China is rapidly replacing Europe as the second leading source of capital fueling Israel’s high-tech sector.
“Soon, we expect China to be our number one partner for joint projects managed by our office,” said Avi Luvton, Asia Pacific director in the research and development branch of Israel’s Chief Scientist Office.
Caution: Washington is Watching
Courtship of China is an increasingly critical element of government strategy, compelling growing calls to revive defense trade.
Despite redoubled economic, scientific and commercial trade ties, the two sides have not fully recovered from the bilateral rift triggered by Israel’s 2000 termination of a high-priority arms deal. But the fierce US objections that forced Israel to cancel its $1.1 billion contract for a Phalcon early warning aircraft with Beijing are more relevant than ever, experts here say.
Burgeoning ties with Beijing must be carefully balanced with full compliance of Israel’s obligations to its chief ally in Washington, insists former Defense Minister Ephraim Sneh.
Any benefit to Israel from revived defense trade with Beijing cannot possibly match the invaluable political, economic and strategic support from its top ally. That said, Sneh suggests the two sides review export restrictions to China.
“Strategic cooperation with the US is a vital Israeli interest. It applies also to the agreement about exports to China,” Sneh said of a decade-old pact that obliges US vetting of intended defense sales to China.