International Relations: The panda in the room
Aside from buying chemicals like potash, used in fertilizer, and bromine, used in manufacturing, from Israel, China also buys huge amounts of electric equipment high-tech supply.
THE CHINESE New Year and Spring Festival celebrations that took place in Tel Aviv, Feb, 2013. Photo: Marc Israel Sellem/The Jerusalem Post
The stringy zig-zag stripes of the newly-built birdcage stadium, one of seven
built in Beijing for the 2008 Summer Olympic Games, would have been stunning
without all that smog in the way. The sooty air, darkened from the exhaust of
3.3 million cars and booming industrial production, led some nervous athletes to
wear masks when they arrived in the Chinese capital for the competition. In the
weeks leading up to the event, China spent $17.58 billion to reduce air
pollution, ordering cars off the streets, shuttering factories as far as 100
kilometers away and demanding 30 percent emissions cuts in its
With economic growth projected at upwards of 7% this year and
5% to 6% for the next decade, there will only be more factories, more
manufacturing and more cars spewing exhaust into the air. Not only must the
country find ways to control its pollution – a national health hazard by any
standard – but it must also find ways to accommodate its urbanizing population
and shift its industry toward higherwage jobs, which is no small
But with challenges come opportunities, and Israeli business
is chomping at the bit to cash in.
On the green front, China is
increasingly looking to Israel as a source of alternative, clean technology, a
growing area in the bilateral business relationship.
“Israel is not an
energy supplier, even with all its gas. Our neighbors are,” says Amos Yudan,
chairman of the Israel-China and Hong Kong chamber of commerce and CEO of
Comodan, a company that promotes Sino-Israeli business. “The Chinese see Israel
as a center of technological development, and they are very interested in
everything having to do with energy and energy savings.”
Chinese firm Suntech Solar sent executives to meet with Israeli solar companies
in Israel and began testing new solar panels in the Arava Desert alongside
Israeli investment firm Capital Nature. A few weeks later, China’s HuaXiang
Group made a $2.5 million investment in 3G Solar, a Jerusalem-based start-up
that develops dye-based photovoltaic cells. China Development Bank, one of the
top 50 banks in the world, is seeking to finance solar energy projects in
“Israeli innovation positions it as the natural partner for
China,” Alex Pevzner, the director of China affairs at The Israel Project,
recently wrote in The Jerusalem Post. “Less than 10% of China’s land is arable
and China is suffering from ever more severe droughts.”
Over the next
decade, it is expected to spend $850b. to clean up its water supplies. That’s
good news not only for Israel’s clean water technology companies but also for
its agricultural companies, which have been built on efficient use of limited
resources in the desert.
But thinking that Israel has the environmental
solution for China may be a mistake. The clean technology game is more of a
two-way street than most people realize.
According to Bloomberg, China’s
clean technology investment in 2012 rose 20% to $68b., making it the world
leader in green investment. (Its investment was over half the United States,
which came in second).
With the mind-boggling levels of investment and
its centralized ability to direct resources, China is also a technology
incubator. In 2012, China was No. 1 in the world for new patents, and it may
even best Israel at its own game.
“With all due respect to Better Place
in Israel, China is the world leader in developing electric cars,” says Tzahi
Kanza, co-CEO of the Tel Aviv-based China Alliance Institute, referring to the
Israeli electric car company.
Kanza notes that five million cars are sold
annually in Beijing alone. Because of the high demand, most people wanting to
buy a car have to wait three to five years to get a license. Getting an electric
vehicle moves you to the front of the line.
That makes sense, given the
country’s energy needs. From 2008 to 2035, the Argonne National Library projects China’s transportation energy consumption will grow
“Despite this whole idea that we’re making big strides in the
electric cars, the serious innovations will be in China,” Kanza
In the Middle East, of course, politics can sometimes get in
the way of business.
“China is buying huge amounts of energy from Iran,
including gas, so Israel’s new natural gas is a political matter,” says
With China increasingly dependent on the Middle East for its oil,
that may not be surprising. The International Energy Agency estimates that some
90% of the region’s oil will be devoted to fueling Asia by 2035. Israeli
companies looking to China for investment in the Tamar gas field, Yudan says,
have not received any response despite its vast potential.
between a Chinese bank and Yarok Energy to build a $25m. wind farm on the Golan
Heights demonstrate an ability to put political differences
Indeed, the face of Israel’s business relationship with the
super-power in waiting is changing in unexpected and dramatic ways.
the last two decades, incomes have been rising in China, a fact that has two
important implications. For one, labor is no longer dirt cheap, so the kinds of
production in China are changing. High incomes also mean more consumers who want
to spend money on a higher standard of living. “There’s a huge amount of
urbanization. Between 200 [million] to 300 million people will move to cities in
the coming years,” Kanza says. That’s the equivalent of the entire US
“They’ve understood they can no longer just be exporters, so
they’re trying to aid imports and bring in technology for manufacturing,” he
Aside from buying chemicals like potash, used in fertilizer, and
bromine, used in manufacturing, from Israel, China also buys huge amounts of
electric equipment high-tech supply. A third of Israel’s 2012 exports to China
came from Intel alone, and they are hungry to import technologies to further
China’s development also means its exports to Israel
are changing. No longer simply a powerhouse of cheap labor for basic products,
China is now supplying Israel with products such as medical supplies and
infrastructure. China is on board to build the railway line between Tel Aviv and
Eilat, and will also help with the Tel Aviv light rail.
“They used to
talk about importing schmattes [shabby garments] from China,” says Yudan, who
predicts an influx of Chinese cars in the Israeli market in the future. “But now
they are selling Chinese-branded smart phones in Israel.” •