When Prime Minister Benjamin Netanyahu took off for China Saturday night, it was a very different kind of trip than the one he had made to Russia the week before.
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Accompanying him to Beijing Netanyahu had no less than four ministers (though not Finance Minister Moshe Kahlon, who bowed out because of political dispute with the prime minister) and no fewer than 100 businesspeople and academics. These include makers of agricultural and desalination technology and two of Israel’s biggest banks, venture capital funds and even corporate lawyers.
Although Netanyahu’s round of meetings with Chinese leaders – including President Xi Jinping and Prime Minister Li Keqiang as well as a host of business leaders – will deal with security and diplomatic issues, the Prime Minister’s Office said that trade and investment cooperation is at the top of the agenda.
The two countries are expected to sign agreements on aviation, education, science, health and the environment as well as an accord clearing the way for thousands of Chinese workers to come to Israel to work in the building industry. A conference on joint innovation projects will take place during the visit as well.
China holds out huge promise for Israel. It is already the world’s second-largest economy and is hungry for the kind of technology Israel excels at to help it make the transition from an economy based on cheap labor costs to one driven by technology and innovation.
Israeli exports (not counting polished diamonds) have risen by an average of 16% annually since 2007, from just $870 million to $3.2 billion in 2016. Imports have risen, too, albeit at a slower rate of 6% annually to $5.8 billion last year, leaving Israel with a sizable trade deficit.
Israel hasn’t been able to fully exploit China’s interest. The United States has effectively vetoed any military cooperation between China and Israel, while Israeli companies have struggled to penetrate the Chinese market. Much of Israel’s exports are from Intel’s giant semiconductor plant in Israel. The next biggest are chemicals and refined oil - not the tech products you would expect.
On the other hand, Chinese investment in Israel has soared since 2010, much of it in high-tech. But Chinese investment has run up into opposition from many inside Israel who are concerned about Chinese intentions and corporate governance. More recently, Beijing has cracked down on outgoing investment.
One way Israel and China have tried to help Israeli companies access China is through joint projects that provide an “umbrella” for Israeli firms. Among them is the “Water City” project launched in 2014 with Shouguang, which designates the Chinese city the hub for Israeli water-tech companies. Another begun in 2015 is the Changzhou Innovation Park, which has a building designated for Israeli companies and other incentives to help them penetrate the Chinese market.