Chinese challenges

The sensitive subject of Chinese investments is expected to be discussed at Wednesday’s security cabinet meeting

July 15, 2019 22:40
3 minute read.
Chinese President Xi Jinping and Israeli Prime Minister Benjamin Netanyahu shake hands

Chinese President Xi Jinping and Israeli Prime Minister Benjamin Netanyahu shake hands ahead of their talks at Diaoyutai State Guesthouse in Beijing, China March 21, 2017. (photo credit: ETIENNE OLIVEAU/POOL/REUTERS)

The sensitive subject of Chinese investments is expected to be discussed at Wednesday’s security cabinet meeting. The topic has long been on the agenda, and the longer the government has avoided making difficult decisions, the harder those decisions become.

The question of foreign investment – and particularly Chinese – is important not only for its domestic implications; there are huge foreign policy ramifications. As The Jerusalem Post’s Herb Keinon noted this week, the issue is one of the few points of friction between Jerusalem and Washington under the Trump administration.

It is, of course, impossible to consider this issue and the potential consequences without taking into account the current serious trade war between the US and China. President Donald Trump and his National Security Advisor John Bolton are both taking a tough stand against the People’s Republic.

Most attention in the US has focused on Chinese investment, construction and management of the new Haifa Port, close to the existing port used by the Sixth Fleet.

Just last month, the National Defense Authorization Act defense spending bill included a warning against Chinese investments in such sensitive infrastructure projects.

President Trump has raised the matter directly with Prime Minister Benjamin Netanyahu and made sure, through Bolton, Secretary of State Mike Pompeo and others, that the US perception of this Chinese project as a threat remains on the agenda.
The scope of Chinese investment in Israel is stunning. Apart from the Haifa Port, China has a similar project in Ashdod, Israel’s second major seaport. Chinese companies dug the tunnels under the Carmel; are digging and will run the light rail in Tel Aviv (which also runs close to the hub of Israel’s security establishment at the Kirya); have been discussing a railroad to Eilat (the subject of a warning by former Mossad chief Efraim Halevy); and are major investors in Israeli hi-tech start-ups, medical care companies as well as in Israeli academic institutions. Apart from the possible consequences of losing key economic assets and technological knowledge, many of these ventures have serious cybersecurity aspects to consider.

Chinese companies have purchased Tnuva, Israel’s iconic dairy company; Makhteshim Agan, the major crop protection company; and cosmetics giant Ahava, whose skincare products are based on Dead Sea minerals. They have also sought Israeli banks and insurance companies.

Last month it was reported that Israel Electric had sold its Alon Tavor power station to a consortium of two Israeli companies that had partnered with a Chinese company.

It should be kept in mind that the People’s Republic of China has developed a unique system that combines capitalism with communism, but ultimately it is the government that has control and ownership of all Chinese companies. Many of these projects are directly linked to China’s Belt and Road Initiative that would connect China to Europe. Hence, Israel is not the only country enjoying the fruits of Chinese investment while being concerned about the security risks.

It is essential that the government figure out a way to maintain a delicate balance, weighing economic interests, the free market and the desire to encourage foreign investment with uncompromisable national security concerns and strategic independence. And it must be recognized that the bipartisan relationship with the US falls into the category of national security interests. Israel cannot afford to endanger ties with a future administration, either Republican or Democrat, because of such projects with China.
Israel might not be able to cancel its current contracts with Chinese companies, but it should carefully consider the national security aspects of such ventures and prepare a mechanism to handle and review future deals. There’s a need for more coordination among different Israeli entities. Ministers must make sure that in their race to reach the ribbon-cutting stage of major infrastructure projects they do not cut ties with the US, Israel’s strongest ally, or harm Israel’s own long-term security interests. China presents many opportunities for Israel along with challenges. It is essential that the Israeli establishment take a long-term strategic view of the overall picture and strike the right balance in its business with Beijing.

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