Israel, China: Beijing Tempts Israel With Money for Development

Oct 26, 2018 | 18:13 GMT

Israeli Prime Minister Benjamin Netanyahu speaks during a meeting with Chinese Vice President Wang Qishan in Jerusalem on Oct. 24, 2018. Wang became the most senior Chinese official to visit Israel in 18 years as the two countries look to bolster their growing business ties.

Israeli Prime Minister Benjamin Netanyahu speaks during a meeting with Chinese Vice President Wang Qishan in Jerusalem on Oct. 24, 2018. Wang became the most senior Chinese official to visit Israel in 18 years as the two countries look to bolster their growing business ties. 


The Big Picture

From Asia to Africa, China is challenging the United States. In the Middle East, it is finding ways to exploit the region's need for investment and to build up relationships beneath the dominating U.S. shadow. The Belt and Road Initiative is a means to that strategic end, and in Israel, Beijing is trying to close a key gap in the Levant. But America's close relationship with Israel means that the task won't be easy.

China's relationship with Israel is unlike any other Beijing is pursuing in the Middle East. Israel is the closest U.S. ally in the region and dependent upon American military aid to keep its armed forces on the cutting edge. Yet China is trying to use the heft of its financial investing to make inroads into Israel and the region. On Oct. 25, Chinese Vice President Wang Qishan completed a three-day trip to Israel, where he sought to expand the Belt and Road Initiative and undermine U.S. influence. The visit produced few new developments in their relations — only promises of future free trade and cooperation — but it did serve to heighten U.S. concern about Beijing's influence there.

In the short term, China is trying to get access to Israeli technology and the know-how behind its vibrant startup environment. In the long term, it is trying to build up a greater partnership to open doors for future strategic development in the Middle East. To do so, it must contend with Israel's close ties to the United States and any obstacles Washington could throw in its way.

To get around these barriers, Beijing is dangling the prospect of investment. Israel wants the financial backing to build up its infrastructure, including ports at Haifa and Ashdod, the Carmel road tunnels in Haifa and light-rail transit in Tel Aviv. For Israel, the need is pressing: Projections indicate its population will double in 30 years. Also, the price tag for these projects is an estimated $200 billion — a substantial sum for a country whose gross domestic product is $350 billion a year. U.S. investment in Israel's infrastructure is currently negligible, on the other hand, and is primarily in the country's manufacturing sector. On Oct. 21, U.S. Treasury Secretary Steven Mnuchin indicated that the United States wants to increase its financial support for Israeli infrastructure. But if and when it does, Beijing could already have a head start.

In exchange for Chinese investment, Israel is offering access to some of its high-performing universities, which would help Beijing boost its tech sector — especially beneficial as the trade war with the United States heats up. Israel has also expanded opportunities for tourism by signing a 10-year, multiple-entry visa agreement with China in 2016. That deal also benefits businesspeople traveling back and forth between the two countries. 

Yet substantial differences remain between the two. Israel is aggressively pursuing an anti-Iran strategy, which is undermining the regional stability that China's Belt and Road Initiative needs to thrive. In turn, China has been a major buyer of Iranian oil, and a prominent backer of the nuclear deal with Tehran that Israel strongly opposed. China also has decades of votes against Israel in the United Nations, including most recently its condemnation of the U.S. decision to move its embassy to Jerusalem. Beijing has wanted to remain neutral in the Palestinian-Israeli conflict, and Israel increasingly expects its partners to overlook the problem. But China also wants access to Arab energy, so it may find itself navigating the thorny issue more often than it likes. To its advantage, Beijing has so little influence with either side or the peace process that it can largely sidestep the conflict. 

China's record on industrial espionage and intellectual property theft also worries innovation-heavy Israel. Its government is considering creating an oversight committee to assess the risks of foreign investment and to head off any Chinese financing that could be a strategic threat. 

In addition, there are no cultural and social connections between China and Israel like there are between Israel and the United States. China has no influential Jewish or evangelical community to serve as advocates, and the government keeps close watch on China's 67 million Christians. The Communist Party's official atheism renders the question of holy sites and religion moot — even though China has traditionally had friendly relations with Judaism. But while Israel has no cultural or religious ties in China, its connections to the United States have allowed it to maintain its influence and ties there through successive presidential administrations. 

For now, economic transactions remain the primary means for China to gain ground in Israel. But such business deals are already attracting the attention of the United States and hindering relations — as was highlighted recently when the U.S. Navy warned it could no longer use a port in Haifa that was managed by a Chinese company. Those close U.S.-Israeli ties will continue to hamper Chinese efforts, and Washington's anti-Iran policy could further interfere with Beijing's moves in the region. Still, the United States does not meet all of Israel's economic needs, so Beijing will continue to find deals it can sign with Israel.