Chinese-Israeli ties are stronger than ever — and the US is alarmed

The United States is increasingly concerned about China’s growing economic ties in Israel, with its most recent military budget bill warning Israel against business with Beijing, citing “security implications”.

While Donald Trump has repeatedly talked up his unwavering support for Israel and its beleaguered Prime Minister Benjamin Netanyahu, the US Senate is growing restless over China fostering ties with Israel.

Israel’s decision to lease a port in Haifa to the Shanghai International Port Group for 25 years has come now come under fire. A draft text of the 2020 National Defense Authorization Act, which defines the US military’s budget and priorities next year, specifically citing the port.

Haifa has long been a docking point for the US 6th Fleet, leading the NDAA to warn Israel that the US “has serious security concerns with respect to the leasing arrangements”, and urges the Israeli government “to consider the security implications of foreign investment in Israel”.

The NDAA bill was ratified by the Senate Armed Services Committee, and was passed on Thursday, June 28 by full Senate vote, which saw 86-8 in favor of the $750 billion dollar bill.

The warnings follow rising anti-China pressure exerted by Trump’s administration. 

Israel’s alleged reluctance to carry out security vetting of Chinese investments resulted in considerable criticism by the White House, following the award of multiple key Israeli infrastructure contracts to Chinese firms.

Among the critical signed deals include a tender for building a $1 billion port at Ashdod, won by China Harbour Engineering Company, and a pending $4.1 billion deal for light rail transport infrastructure in Tel Aviv, currently being bid on by four state-owned Chinese firms.

“China increasingly views Israel as a promising alternative for technology transfers the United States refuses to share with China," Mark Jefferson, an analyst with Stratton Consulting Group, told TRT World.
"US cooperation with Chinese firms was always grounded by fears of corporate espionage and restrictions. The Israelis care more about their economy; critical to their national security, no matter what an ally like the US may think,” he added.
China’s motives ‘are not pure’

US Deputy Secretary of Energy Dan Brouillette warned on Monday June 24 that Israel should take caution when allowing Chinese investments into their critical infrastructure, emphasising that the motives underlying their investments “are not pure”.

“I would urge Israel to be cautious about some of these types of investments,” he said after addressing an oil and gas conference in Tel Aviv.

Deepening ties

Israel however, has fallen back on its realpolitik stance of Israeli interests first, allies second. With mutual trade totalling nearly $11 billion annually, the scale of economic cooperation between the two countries is unlikely to be scaled back.

A recent study conducted by the RAND corporation, highlights the rapid growth of Israeli-Chinese economic ties from 2000 onwards, following a decade of defence technology cooperation.

Today, business between the two countries has left no stone unturned.

Commenting on the growing trade volume between the two countries, analyst Jefferson said: “Israeli goods sold to China rose by $2.4 billion dollars between 2017 and 2018." 

For China, he said: "Its investment in powerhouse markets, and especially in infrastructure development ensures long-term GDP growth, as part of a diversification bid that’s not reliant on any one country.”

The China-US trade dispute doesn’t seem to be putting a damper on Israeli business with China. 

On June 26th, Chinese telecommunications giant Huawei Technologies made waves with its first foray into the Israeli solar energy market. This came only a day after it confirmed closing its solar energy operations in the United States.

The major project will see Huawei install solar inverters in a number of 30 megawatt solar farm projects across the country. 

Israeli companies are also equally interested in Chinese markets. Nearly 110 Israeli start-ups were present at the China-Israel Conference held on June 25. On the flip side, nearly 1,800 Chinese investors and institutions attended the conference.

What’s on the table?

Aside from their ongoing cooperation in defence sectors, Israel has an established foothold in cutting-edge manufacturing, energy and health sectors. China on the other hand, has a significant market, and a thirst to acquire new technology.

“For China, it’s about more than just acquiring new technology. China has exhibited an incredible ability to reverse-engineer technology, skipping the incubation period usually necessary to research and develop such technology in the first place. Some call this corporate espionage,” said Khalid Grine, a professor at the Algeria’s National Polytechnic School.

“Beyond this, China has proved that its able to take technology it only recently adopted and jump past competition through a combination of intense research, deep pockets, and a driven research culture. We can see this in China’s new automobile industry which competes on a global scale, and in their missile technology which is quickly offsetting US advances in the South China Sea,” he added.

Established ties

It seems that the Israeli-Chinese powerhouse is here to stay however. The two countries recently established the China-Israel Innovation Hub located in the Taopu Smart City in Shanghai, which is home to research and development initiatives drawing on a $145 million innovation fund to promote joint-cooperation and possibly technological breakthroughs.

China remains Israel's largest trade partner in Asia, and its third largest economic partner. 

in Asia and third largest one in the world. Bilateral trade reached $13.9 billion in 2018, up six percent on a yearly basis, data from China's Ministry of Commerce showed in March.

While trade between China and Israel is small relative to economic ties shared with the US or EU, it has nonetheless grown by 200 times over the last two decades, leading many to speculate over Israel’s role as an ally of the United States during the ongoing trade war.

The scale of bilateral trade, although a small figure compared with China's trade with the US or the EU, is about 200 times larger than it was about two decades ago, according to a report by US-based think tank Council on Foreign Relations in June last year.