SIGNAL Note 23

Prime Minister Benjamin Netanyahu visits China, marking 25 years of formal relations

Prime Minister Benjamin Netanyahu was invited by President Xi Jinping to Beijing to mark 25 years of formal diplomatic relations between Israel and China. This March 2017 trip was PM Netanyahu’s second official visit to China during President Xi’s tenure. The delegation’s primary focus was trade and at its core was the third meeting of the China-Israel Joint Committee on Innovation and Cooperation (JCIC). The visit provided both countries with the opportunity to further broaden bilateral relations by expanding the foundations for economic cooperation and building diplomatic capital. More specifically, the events of PM Netanyahu’s trip to Beijing encouraged Chinese investment in Israel and further opened the door for more diverse Israeli investment in the Chinese market. In addition, the visit advanced the ongoing free trade agreement (FTA) discussions between China and Israel – another round of FTA negotiations will take place in July.

The visit was significant in a variety of ways beyond mutual economic development. It illustrated Israel’s appreciation and respect for China’s top-down approach to business and commerce as a reflection of Chinese culture and history. This was understood to be the diametric opposite of Israel’s bottom-up business culture where individual companies, businesses and corporations act independently from the government including in international business. With Chinese companies seeking approval from both their own government and that of the country where they want to do business, Israel sought to create a framework to suit their needs.

In order to effectively advance the innovation cooperation plan established between China and Israel in 2013, Prime Minister Netanyahu established a high level committee or task force to provide the necessary government support crucial in building mutual trust and meaningful business cooperation with China. Working with Israel’s task force on the China side is the NDRC.
During the four years of cooperation since 2013, China developed an ever-growing appreciation for the relevance Israel holds in achieving its goals of economic innovation development. The success of the bilateral efforts was portrayed on the Israeli side when four Israeli Government Ministers and 90 businesspeople from Israel joined PM Netanyahu’s delegation. Bilateral successes were shown on the Chinese side when Israel was given the unusual honor of placing a wreath of flowers at the Monument to the People’s Heroes in Beijing’s Tiananmen Square and PM Netanyahu was hosted not only by PM Li Keqiang and Vice Premier Liu Yandong. China’s sincere appreciation for Israel’s potential contribution to Chinese innovation and technology was especially shown in the warm welcome by President Xi Jinping who, in addition to the working meetings, hosted the senior Israel delegation for a formal dinner.

Business Matters

Both China’s and Israel’s leaders acknowledged that the main order of business during PM Netanyahu’s visit was trade. The PM stated before the visit that he was eager to “marry Israel’s technology with China’s capacity.”1 Vice Premier Liu Yandong, said she is “deeply impressed”2 by Israel’s culture of research and innovation and stated that “innovation cooperation is a highlight of our bilateral relations.”3

In total, an impressive 21 business agreements were signed during the visit. A further 10 bilateral government agreements were signed by the two countries’ leaders, highlighting Israel’s commitment to China’s top-down approach. Israel recognizes that the bilateral agreements serve to create stronger trust between the two nations and the necessary framework to effect the signing of future business agreements. In addition to the business agreements, Israel and China signed a slew of academic cooperation agreements with Israeli universities. In Daoyutai, the President of Israel’s Technion – Israel Institute of Technology- spoke of the nonpareil cooperation that is facilitating the establishment of the Guangdong Technion in Shantou.

The Presidents of Israel’s leading universities such as the Technion and Haifa University and of leading China-Israel organizations such as SIGNAL as well as the scores of Israeli businesspeople who al comprised the Israeli PM’s delegation constituted the largest official Israeli delegation ever to visit another country. Leading business heads from a variety of industries and companies already operating in China or poised to enter the Chinese market included leaders of IDE, Bank Leumi, Bank Hapoalim, Tnuva, NaanDanJain. These and others met with hundreds of Chinese businesspeople who participated in the PM Economic Summit to discuss and sign cooperation agreements. The Summit featured panels hosted by Amb. Yaffa Ben-Ari, Vice Director of the economic section of Israel’s Ministry of Foreign Affairs and Avi Hasson, Israel’s Chief Scientist.

At a ‘Power Breakfast’ PM Netanyahu hosted heads of some of China’s largest corporations, enjoying tens of billions of dollars of annual turnover. These CEOs and Israel’s Prime minister discussed the vast range of opportunities and collaboration potential of China-Israel joint ventures. Included in the list of China’s corporations were Wanda, Alibaba, Wahaha, Lenovo, and Baidu. Their CEOs heard PM Netanyahu explain the added value of investing in Israel such as access to its unique human capital, making clear the strong official Israeli support for business cooperation with China.

The four cabinet Ministers joining Israel’s Prime Minister served as another testament to Israel’s recognition of the growing stature of the People’s Republic of China. Rarely do as many as four Ministers make a joint visit to a foreign country. Economy Minister Eli Cohen, Environmental Protection Minister Zeev Elkin, Technology and Space Minister Ofir Akunis, and Health Minister Yaakov Litzman each held meetings and advanced cooperation in their areas of responsibility. The Israeli Ministers were welcomed by Vice Premier Liu Yandong, Science and Technology Minister Wan Gang, Vice Health Minister Li Bin, Vice Environmental Protection Minister Zhao Yingming, Vice Culture Minister Ding Wei.

The ministries in attendance on both sides reflect the degree to which Israel and China understand the immense benefits that could come from strong cooperation in the hi-tech, agriculture, food, water, medtech, and bio-tech industries, as well as in China’s Belt & Road Initiative (BRI).

Comprehensive Innovation Partnership

Perhaps the most significant outcome of the visit was the agreement between China and Israel to strengthen their relationship by establishing a Comprehensive Innovation Partnership.

The Comprehensive Innovation Partnership marks a pivotal development in bilateral relations between the two countries. The Prime Minister’s Office in Jerusalem stated that this development will “bring the ties and the cooperation between the two countries to new heights.”4 It will serve to open new formal channels of cooperation in the field of innovation between Beijing and Jerusalem. This framework is understood to facilitate prosperous and fruitful results from connections made by business representatives on the March delegation. This development creates great opportunities for both sides, especially considering China’s heightened interest and involvement in the Middle East as China advances BRI bilateral projects. Israel recognizes that the BRI offers a limitless platform for China-Israel innovation cooperation opportunities and ways to jointly take the win-win formula beyond China’s borders to the 65 countries participating in the BRI.

Potential Benefits for China

China’s warm welcome of PM Netanyahu’s delegation indicates the importance China places on its relationship with Israel. It recognizes how strengthening ties with Israel could serve its interests in a number of fields.

The most obvious of these are business and innovation. China’s global expansion over the past few years has presented it with new sets of needs and challenges. As China transitions from a manufacturing-dominated economy to one driven by innovation, it must identify valued cooperation partner nations that can enhance the pace of innovation.

In 2012, China discovered that Israel could provide vast innovation opportunities. This can be seen in many ways, including the three joint artificial intelligence centers to be built in Israel and China as a result of the bilateral agreements signed during PM Netanyahu’s visit in March. Israel is a leader in biotech, agritech, envirotech, medtech and food-tech among other fields. These are pivotal industries which can help China tackle the environmental, health and social issues it faces, caused by its rapid industrialization.

The list of business and bilateral agreements signed during the two-day visit provide the necessary ties for Chinese investment in Israeli innovation and Israeli investment in the Chinese market. The two countries signed a technology innovation agreement in the areas of renewable energy, biomedicine, telecommunications, and agriculture. Agreements like this allow China not only to utilize pre-existing Israeli innovations, but to learn from Israeli expertise and experience in order to enhance their own innovation industry. Israel’s innovation industry and advanced science and technology companies also provide an outlet for Chinese investment.

In addition to the business, innovation and academic opportunities, the improved ties between the two nations could have diplomatic significance for China regarding its main trading partner. Israel’s uniquely warm relationship with the United States could act as a mediating factor in easing tensions and/or building understandings between China and the US. China is in process to affirm its position with the new Trump Administration. It understands Israel’s unwaveringly strong bond with the US and recognizes the possible opportunity which the Jewish State could signify regarding Washington.

Benefits to the BRI

Going forward solid relations with Israel can contribute to the success of China’s BRI in other ways. Israel is known in China as the most stable nation in the Middle East. At the same time, its location in the region makes it geographically strategic for China as a gateway to Europe and Africa. PM Netanyahu’s visit could act as a springboard to enable China to benefit from Israel’s strategic positioning with regard to the BRI. The Shanghai International Port Group has already won a 25-year operating concession to run Israel’s Haifa port, while China Harbour Engineering is contracted to build a new port in Ashdod. China is also bidding to build a high-speed railway connecting the Red Sea to the Mediterranean, a route which could provide them with an effective back up to the Suez Canal. Israel could well act as a gateway from East to West for China’s trade routes, as well as providing China with a stable position in the region.

Stronger trade arrangements with Israel and the Comprehensive Innovation Partnership can help facilitate China’s Belt & Road Initiative regarding key technologies.

The geographic areas through which the roads, bridges, tunnels and trains of the BRI will pass are generally isolated, uncultivated regions. Israeli innovation that is being promoted by the agreements signed last month could be crucial to providing solutions in agriculture, water management, desalination, recycling, food production and technological greenhouses especially in arid zones.

Furthermore, Israeli security and counterterrorism expertise could be utilized to safeguard the many projects in the BRI cooperation countries. As the BRI passes through many potentially unstable regions, intelligence sharing and field security training could add significantly to the security of the BRI.

Potential Benefits for Israel

As PM Netanyahu pointed out, the new business connections made on the visit mean “jobs, the development of businesses and a link to the major Chinese markets. This is good for the citizens of Israel and for the Israeli economy.”5 China could provide Israel with a secure new alternative to the western marketplace, with an economy that is growing rapidly.

China has embarked on two initiatives that are of political and economic interest for Israel. The first of these is the Asian Infrastructure Investments Bank (AIIB), and the second is the BRI. Both initiatives can increase China’s global political influence and its share in the Euro-Asian markets. The strengthened ties secured by PM Netanyahu’s delegation, could allow both the Jewish State and its private companies to tap into the benefits of these initiatives while making significant contributions.

The AIIB is trying to solve the infrastructure gap in Asia by financing projects throughout the continent. It aims to supplement limited private credit financing and foster sustainable economic development. In 2015 Israel joined a list of over forty countries in becoming a founding member of the bank. Whereas Israel is barred by Muslim member states from joining the Asian Development Bank, it was able to join some of the same countries in the AIIB thanks to the influence of Chinese leadership. Membership in the AIIB affords project access to Israeli entities with unique expertise in areas such as water and waste management and energy efficiency.

The BRI, China’s modern-day Silk Road project, requires successful confluence of many complex factors to reach its goals. As has already been discussed in this Note, Israeli technology, innovation, and R&D companies as well as Israeli security expertise could comprise a useful component of that success – offering great new opportunities to Israel’s economy.

Finally, by developing close economic cooperation with China, Israel could benefit from China’s growing political significance in the Middle East. China maintains warm relations with nations lacking diplomatic ties with Israel. In fact, just days before Netanyahu landed in Beijing, China hosted Saudi Arabia’s King Salman with whom they signed deals worth approximately $65 billion. Furthermore, over half of China’s oil imports come from the Middle East and, as part of its BRI, it is investing heavily in transportation infrastructures in the region including roads, railroads, and seaports.

Despite China’s declared policy of non-intervention in the internal matters of other states and its cautious aversion to risk, it will likely become an influential political player in the region even if through economic means. PM Netanyahu hopes to use the recently formed trade cooperation as a springboard for China’s political and diplomatic support in regional affairs, “There is a great deal of convulsion in the world, including in our part of the world, and I would like to have the opportunity to exchange views with you and to see how we can cooperate together for the advancement of security, peace and stability, and prosperity.” 6

With its unique position in possessing diplomatic relations with China, the US, and Russia, Israel could contribute on the world stage as a mediating voice in Multilateral-relations.

Mutual benefits
The strengthened bilateral relations reached during the recent visit of PM Benjamin Netanyahu to Beijing, including the new Comprehensive Innovation Partnership, offer a win-win scenario for the Jewish State and the Middle Kingdom. China looks to benefit from Israel’s thriving innovation to provide it with solutions for issues that include, among others, food safety, agriculture, medicine and security, all of which it can also be relevant to the BRI. On the diplomatic level, China could engage Israel as an interlocutor that understands and appreciates Chinese culture and the PRC’s growing role in the international theater to facilitate greater mutual understanding with the USA.

For Israel, the official delegation to China in March served to deepen the trust and mutual respect needed to maximize the potential of its dealings with China. The top-down approach by Israel can provide a strengthening base of governmental agreements and approvals which open the door for fruitful business cooperation.

Israel can profit from large scale Chinese investment in a range of business sectors, as well as in transport infrastructures related to the BRI. Israel can also benefit from cultivating distribution and sales within the huge Chinese market. On a political level, Israel can benefit from China’s long history of warm relations with the Arab and Muslim States and its growing global stature. With strengthened relations between the two nations come opportunities never before presented to Israel, such as membership in the AIIB. Finally, it is the stated hope of Israel’s Prime Minister that as the relationship develops, so may the possibility for dialogue to promote Israel’s security and stability in the Middle East.

  1. Ahren, R. (2017, March 21). In Beijing, Netanyahu looks to ‘marry Israel’s technology with China’s capacity’. Retrieved April 1, 2017, from http://www.timesofisrael.com/in-beijing-netanyahu-looks-to-marry-israels-technology-with-chinas-capacity/
  2. Ahren, R. (2017, March 21). In Beijing, Netanyahu looks to ‘marry Israel’s technology with China’s capacity’
  3. Ahren, R. (2017, March 21). In Beijing, Netanyahu looks to ‘marry Israel’s technology with China’s capacity’
  4. Prime Minister’s Office. (2017, March 21). PM Netanyahu and Chinese Vice Premier Liu Yandong Attend the Third Meeting of the China-Israel Joint Committee on Innovation Cooperation. Retrieved April 1, 2017, from http://www.pmo.gov.il/English/MediaCenter/Events/Pages/event3china210317.aspx
  5. Ahren, R. (2017, March 20). Netanyahu: Israel is ‘perfect junior partner’ for China’s economy. Retrieved April 1, 2017, from http://www.timesofisrael.com/netanyahu-israel-is-perfect-junior-partner-for-chinas-economy/
  6. Martina, M. (2017, March 20). After Saudi king, China warmly welcomes Israel’s prime minister. Retrieved April 1, 2017, from http://uk.reuters.com/article/uk-china-israel-idUKKBN16R0Y3
Published: 18-04-2017