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Israel is balancing increased Chinese investment with US suspicions surrounding Chinese tech. Sebastian Shehadi and Joel Shapson-Coe report.

Chinese greenfield foreign investment into Israel rose between 2016 and 2018 compared with all previous years, with 11 projects. Most were in software and IT services and consumer electronics, according to investment monitor fDi Markets.

Meanwhile, investment from China among Israeli tech start-ups has increased over the past two years, growing from about 15 investments per quarter to an average of 20, finds a report from Tel Aviv-based research firm IVC Research Center. The majority of this went into software and life science companies.

These trends have not gone unnoticed. China’s $2bn takeover of Israel’s largest port prompted US secretary of state Mike Pompeo to warn that Chinese ‘critical infrastructure’ operations undermines US-Israel “intelligence sharing and co-location of facilities”. 

Israel’s National Security Council may recommend the government follows global protectionist trends by establishing a review body for foreign investments with ‘strategic implications’. Government ministries, fearing FDI fallout, oppose these proposals.

Israel’s next prime minister will need to be careful to strike a strategic balance, seeking the US’s continuing support for a hawkish policy on Iran while negotiations for an Israel-China free trade agreement continue.

Chinese-Israeli trade has grown exponentially in the past two decades. In 1992, the trade budget between Israel and China was around $50m. By 2016, it had jumped to of total of $16bn, according to a report in the South China Morning Post newspaper. In March, Chinese giant Alibaba expanded its Israeli start-up portfolio by acquiring augmentation platform, InfinityAR. 

Nonetheless, the US remains, by far, the leading foreign investor in Israel, says fDi Markets.

This article is sourced from fDi Magazine
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