Israel-China bilateral relations already ‘mainstream’

Israel has recently started to attract the interest of Chinese investment funds.

By
January 21, 2015 20:53
4 minute read.
The Shanghai Jewish Refugees Museum

Benjamin Netanyahu, his wife Sara, and Israeli Ambassador to China Matan Vilnai cut the ribbon at an opening ceremony for a coffeehouse at the Shanghai Jewish Refugees Museum.. (photo credit: AVI OHAYON - GPO)

 
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Marking 23 years since the establishment of diplomatic relations between Israel and the People’s Republic of China (PRC), both countries are entering the anniversary with many aspects of the bilateral ties fully developed, and the relationship having moved into the mainstream of diplomatic ties.

Overcoming the geographical distance, the huge difference in size, and cultural divergence, Israel and China have succeeded in developing flourishing relations in trade, culture, academia and tourism. This may sound obvious, but it is far from being so. Israel and China established diplomatic relations on January 24, 1992, but tying the formal knot was preceded by nearly four decades of missed opportunities and third-party interference.

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While Israel was the first country in the Middle East (and the seventh in the non-Communist world) to extend recognition to the PRC on January 9, 1950, it was also the last to establish relations with China, as the Cold War, misaligned expectations and the US factor in Sino-Israeli ties combined to hinder formal diplomatic relations.

In 2015, though, both sides are looking firmly ahead as the bilateral relationship is booming. Consider, for instance, the economy. Tourism from China is growing, and China is already Israel’s largest trading partner in Asia, with two-way trade exceeding $10 billion.

China is interested to learn from Israel in areas such as science, technology and innovation, whereas Israel needs to diversify away from markets in the West.

Indeed, the two economies are so complementary that Israel and China recently agreed to begin a joint feasibility study for a free-trade agreement.

An FTA with China, the world’s second- largest economy by nominal GDP and the world’s largest economy by purchasing power parity (according to the IMF), will help Israeli exports enter a hugely important but difficult market and provide a significant boost for our competitiveness. Already, China’s share of Israeli exports projected to rise to 10 percent in 2035 from 5% currently.



China is a country of superlatives. For instance, Alibaba Group, the world’s largest e-retailer, listed in the US in September in the largest ever-initial public offering to the tune of $25 billion. Still, that bilateral trade is booming is far from given. Consider that Israel exports to China more than much larger countries such as Turkey or Egypt – in itself a sign of the appeal of Israeli technology and innovation to China.

And it is not just merchandise trade.

Israel has recently started to attract the interest of Chinese investment funds.

This in part also reflects recent trends in the Chinese economy – in 2014, for the first time ever, outbound investment from China exceeded foreign direct investment into China.

Another interesting trend is that of Chinese financial investors entering the global stage: in 2014, financial investors accounted for 22% of total outbound M&A value, twice as much as the average of previous five years, according to the Rhodium Group. In mid-January Israeli start-ups got the chance to take part in a virtual pitch to members of China’s Zhongguancun Private Equity & Venture Capital Association, which includes some of the biggest Chinese investors.

As important as the economy is, it doesn’t cover the complete gamut of the relationship. Political exchanges are frequent. Prime Minister Benjamin Netanyahu and former president Shimon Peres visited China in May 2013 and April 2014, respectively. Chinese Vice Premier Mme. Liu Yandong visited Israel in May 2014, the highest-level visit since president Jiang Zemin came to Israel in April 2000.

That was on top of other “once in a decade” visits, such as by the Chinese Minister of Foreign Affairs Wang Yi in December 2013, visits by several Chinese Politburo members, and the first-ever visit by the Chinese chief of staff, Chen Bingde, in August 2011. That is not merely a laundry list – the visits are an integral part of thoughtful Chinese diplomacy and signify a willingness on the highest level to further boost ties.

An even more important component is cultural and academic links, the true and long-lasting foundation for future relations. Cultural exchanges are flourishing, with theater, classical and popular music groups, as well as dance troupes, bringing their art to audiences in both countries, and piano master-classes being held for young Israeli and Chinese children, further cementing the friendship. In fact, it has become common for Israeli orchestras, for example, The Israel Symphony Orchestra Rishon LeZion, to play pieces by Chinese composers.

There are numerous partnerships in the academic field as well, and Israel’s Council of Higher Education is giving scholarships to Chinese masters and post-doctoral students. Further, Tel Aviv University and Beijing’s Tsinghua University agreed to invest $300 million to establish the XIN Research Center, intended to research early-stage and mature technologies in biotech, solar energy, water and environmental technologies. In 2013, Technion-Israel Institute of Technology teamed with Shantou University, in China’s southern Guangdong province, to build a Technion campus in China.

Genuine interest on both sides exists to expand and deepen ties further.

While there are some external obstacles, both sides are interested in overcoming them. The potential is tremendous and the trend is positive. After all, 23 years is still a very young age.

The author is the founding director of The Chinese Media Center (CMC), at the School of Media Studies of The College of Management Academic Studies, Rishon Lezion, Israel.

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