China – Israel, Why China is interested fostering economic relationships with Israel ?

China – Israel, Why China is interested fostering economic relationships with Israel ?

A convergence of commercial interests have led the People’s Republic of China and the State of Israel to develop an increasingly integrated bilateral economic partnership that is poised to flourish over the next decade. Bilateral trade has experienced a 200-fold increase since diplomatic ties were formally established in 1992, surging from $50 million to $10 billion in 2013, with plans to double that figure in the next few years; leading Gao Yanping, China’s ambassador to Israel, to enthusiastically exclaim “Our relations are shining with new luster in the new era.”

One of the striking issues that characterizes Beijing’s relations with the region is that it has good relations with all parties. China’s ties with Iran, Turkey, and the Arab world are growing rapidly. Today, China is the largest exporter to the Middle East, Saudi Arabia’s top trade partner in West Asia, the biggest importer of Iranian oil, the major player in the Iraqi oil game and a rising star in the Turkish economy. At the same time, China has been the top market for Israeli exports in Asia.

This convergence of economic interests has served to greatly enhance bilateral Sino-Israeli diplomatic and cultural ties, while fostering a burgeoning commercial partnership that has positioned Israel as a small, yet pivotal, partner for China, a relationship that is poised to blossom in the years to come.


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Logic behind the growing relations

China and Israel established their diplomatic ties in 1992, a year after the start of peace negotiations between the Arabs and Israel in Madrid.

Israel cannot afford to ignore a very important market and country such as China. Meanwhile, Chinese companies are scouring the globe in search for technologies that will help the development of the Chinese economy quickly and efficiently. Yoram Evron, a senior research fellow at the Israeli Institute for National Securities studies (INSS), recently summarized the logic behind the expanded Israeli-China relations: “Israel holds one of the main keys to stability in the region; another is that the events of the Arab Spring have demonstrated that Israel is an island of stability in the heart of a volatile region. In addition, Israel is an important source of knowledge about events in the region. Israel is also seen in China as a source of advanced technologies.” This is in addition to the possibilities of cooperation in the development of natural gas in the wake of the recent Israeli discoveries.

Increasingly, China has turned to Israel to acquire the technology necessary to maximize agricultural output and efficiency, as well as to develop a proficient water purification and reclamation apparatus that can sustain the Middle Kingdom’s urbanization and economic expansion throughout the 21st century. As a nation that boasts 22 percent of the global population, but just seven percent of the world’s arable land, developing a sustainable agriculture sector to efficiently maximize output remains a pressing concern for China. A study published in the Proceedings of the National Academy of Sciences noted Chinese agriculture accounts for 65 percent of all water use in China, with significant waste due to inefficient farming practices. The report went on to conclude that “fast socioeconomic development, rapid urbanization and climate change, along with very limited water resources and arable land per capita” presented China with “major challenges to sustainable agriculture” and constitute a “grave situation” to China’s continued development. This condition has been exacerbated by rampant pollution, desertification that has besieged 30 percent of the country, and a massive urbanization movement in which some 10 million rural residents are relocating to China’s 850 cities annually. To address this growing concern, China and Israel signed a deal worth $300 million in 2012 to export Israeli water technology that will improve agricultural efficiency in China.

Highlighting how crucial this sector is to fostering Sino-Israeli relations, during a state visit to China in 2013, the first such trip by an Israeli prime minister since 2007, Israeli Prime Minister Benjamin Netanyahu pointed to Israel’s expertise in water reclamation, including desalination and purification techniques, and noted that Israel looked forward to sharing its technology with China. Netanyahu said the trip that included meetings with President Xi Jinping and Premier Li Keqiang to discuss expanding economic cooperation and bilateral trade was “very successful.” He concluded that Sino-Israeli strategic and economic cooperation has a bright future as “China is a global economic power and Israel is a global center of R&D, and I think we can complement each other to secure the market of tomorrow” thus formulating what the prime minister deemed to be a “perfect partnership.”

The XIN Center, established between China and Israel for pursuing  strategic cooperation in research and teaching and serve as an international hub for scientific and technical innovation”  and water technology agreements highlight a wider trend of increased partnership in the advanced technology and innovation fields that is set to unfold in the years to come. Shortly after arriving in Israel, Liu proclaimed “I am here to learn from the best practices of Israel in science, technology and innovation. And this is also a trip of promoting cooperation. It is truly our hope that we will be able to bring our cooperation in all fields to new heights.” Netanyahu echoed those sentiments, noting: “We have expanded our cooperation in many ways. China is Israel’s largest trading partner in Asia and fast becoming perhaps Israel’s largest trading partner period as we move into the future.”

Rail links

One of the high profile Israeli projects that the Prime Minister Benjamin Netanyahu is promoting and encouraging Chinese participation in is the so-called Red-Med project. The project would connect by rail links more than 300 kilometers between “Eilat” on the Red Sea and “Ashdod” Port on the Mediterranean Sea. Chinese companies are also looking to invest in Israel’s gas fields in the Mediterranean Sea. Tourism is another area where the Israeli are betting high. The Israeli Tourism Ministry forecasts that the number of Chinese visitors will surge 60 percent this year to 40,000 as Israel tries to boost the religious appeals for a growing sector of Christian Chinese.

There is also increasing cooperation in the scientific and academic fields. In this area four major projects started last year. The biggest educational project is a Chinese donation from the Li Kay Shing Foundation, exceeding $130 million to Israeli Institute of Technology Technion. It is certain that cooperation in the academic and research will witness positive developments in the future as there are many Israeli institutions that are active in the academia and universities circles inside China. Sino-Israel cooperation in the fields of desalination, water treatment and reclamation has grown rapidly in last few years. In this regard, there is a China-Israeli Industrial Park in southern China which mainly focuses on water treatment, in addition China’s largest desalination plant in Tienjin, which is producing 200,000 cubic meters of fresh water every day, was built by the Israeli company IDE.

Limits of the relations

Despite this significant improvement in Sino-Israeli relations, there are issues that may limit the development of relations. China cannot ignore its growing economic and political relations with the Arab countries, Turkey and Iran. The two-way trade between the Arab World and China has increased rapidly to hit nearly a quarter trillion dollars in 2013. If China’s trade with Turkey (over $28 billion) and Iran (almost $40 billion) are included, the total trade reached nearly $310 billion last year. This is not to mention Chinese projects worth tens of billions, China’s oil imports dependence on the Middle East and the Islamic dimension. Over the last nine years, China’s investments and contracts worldwide reached $781.5 billion, Israel represents only 0.02 percent of the total. In contrast, the Chinese investments and contracts in the Arab countries amounted to about $82 billion, or 10.5 percent and in Iran almost $19 billion or 2.4 percent of the Chinese total, according the China Global Investment Tracker.

Although it is true that China needs advanced technology and the Israelis are advanced in some areas, China’s scientific potential is evolving dramatically and as the time passes by, Israel may lose its competitive advantage. Over the last decade, China has made significant progress in science and engineering fields and it is now the world’s third largest producer of peer-reviewed research articles after the European Union and United States according to Science and Engineering Indicators 2014 published by the U.S. National Science Foundation. China is also aiming to achieve 2.2 percent of GDP in total research and development (R&D) spending by next year. The Battelle Global R&D Funding Forecast say that at current rates of R&D investment and economic growth, China could surpass the U.S. in total R&D spending by about 2022.

Chinese involvement in Israeli business has also generated security concerns. The former head of Mossad, Efraim Halevy, is one of the leading critics in Israel who believes that the country should examine the geopolitical considerations and has consistently warned the Israeli government against involving the Chinese in the Red-Med project, arguing that it could lead to a crisis in strategic relations with the United States.  Additionally, Israeli critics also argue that growing Chinese involvement will endanger Israel’s security and might lead to the theft of technology and facilitate operations of Chinese espionage. According to, In a raid seeking information related to Israel’s Iron Dome missile defense system, Chinese hackers infiltrated the databases of three Jewish defense contractors.

All in all, China recognized the Palestinian state in the United Nations, opposed any military attack against Iran, and does not consider movements such as Hamas and Hezbollah as terrorist organizations. Interestingly, one former Chinese diplomat who served in the Middle East (and asked not to be named) told me recently that if in the future, China-U.S. relations were to deteriorate, or is a pressure from Washington on Tel Aviv was to be applied, Israel can’t be trusted. China also does not fully trust Israeli intentions as there are precedents of Israeli spy operations aimed at Israel’s main ally, the United States, so it’s also possible that they will target China if they are given the opportunity. More importantly, “contrary to the Israeli claims, the Chinese leadership are worried that the Israeli policies in Palestine and other places could destabilize the already unstable region,” the source said. Source:, the


From Books:
The Vital Triangle: China, the United States, and the Middle East (Significant Issues Series)This volume explores the complex interrelationships among China, the United States, and the Middle East-what the authors call the “vital triangle.” There is surely much to be gained from continuing the conventional two-dimensional analysis-China and the United States, the United States and the Middle East, and China and the Middle East. Such scholarship has a long history and no doubt a long future. But it is the three-dimensional equation-which seeks to understand the effects of the China-Middle East relationship on the United States, the U.S.-Middle East relationship on China, and the Sino-American relationship on the Middle East-that draws the authors’ attention.


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