China is Learn­ing in Israel how to do Busi­ness in Europe

Foto: Imago Images

In Israel, Chinese invest­ments are increas­ingly viewed crit­i­cally, partly because of China’s rela­tions with Iran. On the other hand, China offers enor­mous eco­nomic oppor­tu­ni­ties, accord­ing to Galia Lavi of the Insti­tute for National Secu­rity Studies in Tel Aviv.

The inter­view was con­ducted by Till Schmidt for LibMod.

How would you char­ac­ter­ize Israeli-Chinese relations?

There are three phases. With the start of offi­cial diplo­matic rela­tions in 1992, new life was breathed into eco­nomic rela­tions in par­tic­u­lar. But mil­i­tary rela­tions also came into the picture at that time, but they ended around 2005, when the U.S. vetoed sales of Phalcon radar systems and Harpy drones to China. That was a big issue here in Israel and it took us a lot of time to get back on track with China. Nev­er­the­less, with the estab­lish­ment of the Export Control Author­ity in the Min­istry of Economy and Indus­try in 2006, the export of mil­i­tary goods to China stopped.

In 2013, then-Prime Min­is­ter Ben­jamin Netanyahu visited Beijing, ush­er­ing in the hon­ey­moon phase of Israel-China rela­tions. It included greater levels of trade, Chinese invest­ment in Israel, tourism and aca­d­e­mic coop­er­a­tion. However, under US Pres­i­dent Donald Trump, this phase ended again. The US admin­is­tra­tion pres­sured Israel to down­grade rela­tions with China. Netanyahu, however, responded mainly with rhetor­i­cal ges­tures. Nev­er­the­less, Chinese invest­ment in Israeli infra­struc­ture and in the high-tech sector has fallen sharply.

Is this due exclu­sively to pres­sure from the USA?

That plays a major role, even under Joe Biden. But there is also the deci­sion by Chinese Pres­i­dent Xi Jinping not to make it easy to invest outside China. This is not limited to Israel, however, but is a global trend. In addi­tion, Israel 2020 estab­lished a screen­ing mech­a­nism for foreign invest­ment in infra­struc­ture projects. How exactly the com­mit­tee jus­ti­fies its deci­sions, for example whether it is always secu­rity con­cerns that tip the scales, is unclear, because the com­mit­tee does not publish its jus­ti­fi­ca­tions. But the numbers make it clear that since the com­mit­tee began its work, there has been a decline in Chinese investment.

How has U.S. strat­egy changed since Joe Biden took office?

Trump was the ele­phant in the room; it remained unclear what exactly was meant by deals that could now no longer be done. Are people still allowed to buy T‑shirts? Dig tunnels and have roads built? And why is the U.S. itself still allowed to do busi­ness with China? Biden com­mu­ni­cates more clearly and takes a stance that is more aimed at joining forces and stick­ing together. There is a dif­fer­ent atmos­phere, a kind of commander’s spirit. Even if there is no cor­re­spond­ing leg­is­la­tion, it is clear what is at stake.

What do Israel and China expect from the joint relationship?

For Israel, China is an enor­mous eco­nomic oppor­tu­nity. After all, it is the largest market in the world, which Israel cannot simply ignore. China also sees Israel as a polit­i­cal medi­a­tor in its rela­tion­ship with the United States. Thus, Chinese gov­ern­ment rep­re­sen­ta­tives repeat­edly asked Israel to bring the U.S. closer to the Chinese position.

But China is also and above all con­cerned with eco­nomic rela­tions, specif­i­cally with gaining expe­ri­ence in Israel. In order to be able to do busi­ness in Europe on a large scale, it needs qual­i­fied expe­ri­ence in an indus­tri­al­ized country. Rep­re­sen­ta­tives of China say this quite clearly, for example Miao Qiang, the CEO of Shangai Inter­na­tional Port Group, which now oper­ates the Haifa BayPort. Chinese com­pa­nies con­sider Israel small and insignif­i­cant enough not to let a pos­si­ble failure count. Con­versely, however, Israel is impor­tant enough to include success in the cor­po­rate portfolio.

Where do you see the heart of the con­flict of inter­est between Israel and China?

China is known for using its massive eco­nomic expan­sion for polit­i­cal influ­ence. This is a big risk. All com­pa­nies are linked to the Chinese Com­mu­nist Party. In addi­tion, the US, Israel’s most impor­tant ally, sees coop­er­a­tion in the high-tech sector as a threat to its own secu­rity. But unlike the mil­i­tary sector, no reg­u­la­tion exists here in the form of a law or a screen­ing mech­a­nism. The US is there­fore pres­sur­ing Israel to estab­lish some­thing similar to CFIUS (Com­mit­tee on Foreign Invest­ment in the United States). But Israel does not want to reg­u­late its hugely impor­tant and inno­v­a­tive high-tech sector.

Are dual-use exports a problem?

Dual-use is, of course, dif­fi­cult to define. An ini­tially inno­cent camera may find mil­i­tary use tomor­row. However, there has been a small unit in the Israeli Min­istry of Economy for several years to screen for dual-use goods. The unit is small, however, and not well-funded. Mean­while: The high-tech sector is a good place to observe what I called earlier the Commander’s Spirit: It is clear that for com­pa­nies doing busi­ness with China, the US market is lost. The high-tech com­pa­nies in par­tic­u­lar under­stand that. So there is a kind of infor­mal screen­ing mechanism.

China also main­tains rela­tions with Iran, Israel’s biggest enemy, which denies the Jewish state’s right to exist, sup­ports ter­ror­ism, espe­cially in the region, and is working on its own nuclear program. Is this an issue in Israeli-Chinese relations?

For a long time, Israeli gov­ern­ments had hoped that deeper eco­nomic rela­tions with China would change Chinese atti­tudes. One hoped, for example, for more UN support, includ­ing on Iran. However, this did not happen, a fact that was finally acknowl­edged by the Israeli side. In talks, Israeli gov­ern­ment rep­re­sen­ta­tives and we at the Insti­tute for National Secu­rity Studies (INSS) always empha­size that doing busi­ness with Iran also involves sup­port­ing terror. The Chinese take note of this — but let it bounce off them. They usually make it clear: We simply see things dif­fer­ently, our rela­tions and busi­ness with Iran are none of your busi­ness. Pol­i­tics and busi­ness are sep­a­rated here.

Is there any oppo­si­tion to this, for example in the Knesset or in the Israeli media?

Yes, there is always crit­i­cism, espe­cially in the media. For example, Efraim Halevi, former direc­tor of the Mossad foreign intel­li­gence service, and the former head of the Shin Bet domes­tic intel­li­gence service, Nadav Argaman, have pub­lished several arti­cles, some of them in English. But it is clear that a sev­er­ance of rela­tions by Israel would not deter the Chinese from doing further busi­ness with Iran. China is simply too pow­er­ful. More­over, not only would enor­mous eco­nomic poten­tial dis­ap­pear for Israel, but also the pos­si­bil­ity of com­mu­ni­cat­ing with a China that might at some point be posi­tioned dif­fer­ently. The point is to keep chan­nels of con­ver­sa­tion open.

What is the Chinese leadership’s posi­tion on Iran’s nuclear program and the rene­go­ti­a­tion of the Vienna nuclear agree­ment, the Joint Com­pre­hen­sive Plan of Action (JCPoA)?

China is in favor of an agree­ment and against the U.S. with­drawal from the JCPoA in 2018. However, China is also in a quandary: because on the one hand, it wants to see Iran back in an agree­ment, and on the other hand, it knows how to use the lack of an agree­ment polit­i­cally for its own benefit to portray the U.S. as an irre­spon­si­ble actor. Overall, the Chinese do not regard the JCPoA as a perfect agree­ment, but at least as a basis for further talks. After a new agree­ment, Israel’s secu­rity con­cerns could then be nego­ti­ated, so the credo goes. But this shows how little the Chinese have under­stood about the threat posed to Israel by the Iranian regime in general and its nuclear program in particular!

Do human rights issues in China — such as the oppres­sion of the Uyghurs in Xinjang province or the con­flicts over Taiwan and Hong Kong — play a role in diplo­matic rela­tions between Israel and China?

This has not really been addressed by Israeli gov­ern­ments. After all, Israel itself is often crit­i­cized on human rights issues, so gov­ern­ments don’t see them­selves in a posi­tion to lecture others. There have been minor excep­tions, such as in the course of the Israeli mil­i­tary oper­a­tion “Guardian of the Walls” in May 2021 (against the ter­ror­ist orga­ni­za­tions Hamas and Islamic Jihad in Gaza, editor’s note). At the time, China was stir­ring things up against Israel in the UN Secu­rity Council, using it as a scape­goat in the con­flict with the United States. Israel, in turn, responded by sup­port­ing Canada’s attempt at the UN to have inde­pen­dent observers inves­ti­gate the human rights sit­u­a­tion in Xinjang.

The oppres­sion of the Uyghurs is a recur­ring theme in the Euro­pean media. In addi­tion, eye-witness reports by camp sur­vivors who have fled have appeared reg­u­larly in the major pub­lish­ing houses. Is there any­thing com­pa­ra­ble in the Israeli media?

There are only a few pub­li­ca­tions on this topic, and when there are, they are mostly in foreign and English-lan­guage media. It’s sad but true: Here in Israel we are so busy with our own prob­lems that we don’t look at coun­tries on the other side of the world. Asked about the biggest threat, most Israelis would answer: Iran, Syria or Lebanon. China is very far away for us.

What is the pre­vail­ing image of China in Israel?

The general public hardly knew any­thing about China until Netanyahu’s trip to Beijing. That has changed sig­nif­i­cantly in the mean­time. More Chinese are now coming to Israel, and there is a lot in the local news­pa­pers about Chinese invest­ments, such as at the port in Haifa. Some Israelis are impressed by the way China has built two hos­pi­tals for Covid patients in Wuhan within a few days. Others crit­i­cize the dic­ta­to­r­ial form of gov­ern­ment or the oppres­sion of the Uyghurs. Surveys, however, are few and far between, and in any case not detailed. For example, a Pew survey found that in 2019, 70 percent of Israelis thought pos­i­tively of China; in 2022, that figure was down to 48 percent.

And vice versa: What do Chinese think about Israel?

There don’t seem to be any polls here. But what I do know is that in the general public, Israelis are often stereo­typ­i­cally seen as “smart” and Israel as a “good country.” I’m always sur­prised that the Chinese have even heard of our small, insignif­i­cant country (laughs).

Galia Lavi is a China expert at the Insti­tute for National Secu­rity Studies at Tel Aviv Uni­ver­sity. Her research focuses on Israeli-Chinese rela­tions, par­tic­u­larly in the areas of infra­struc­ture and China’s foreign policy.









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