Fosun International, the Shanghai based conglomerate and investment company, announced that it is abandoning its efforts to purchase Israel’s Phoenix Insurance Company for $460 million.

In their official statements, both Fosun and Delek, the controlling shareholder of Phoenix, state that the deal was abandoned because certain conditions precedent in the agreement had not been fulfilled or waived. In addition, Mr. Guo, Fosun’s chairman, related to the company’s investment policy and to changes in the global market as reasons for abandoning the deal.

The failure of the Phoenix transaction raises issues that go beyond the specifics of the deal itself and poses questions regarding how Chinese investment is viewed by Israelis and the Israeli media. In recent years, China has become a leading source of foreign investment in Israel and the failure of the Phoenix transaction when coupled with Macronlink’s decision not to acquire Clal Insurance raises concerns about the future of this encouraging trend.

Although Fosun declined to comment on whether the deal was cancelled due to concerns about obtaining Israeli regulatory approval, Israeli media has been reporting for some time that there was concern that regulatory approval may not be forthcoming. In addition, just last month the Chinese conglomerate Macrolink notified Clal Insurance that it has decided to back out of the negotiation to acquire the insurance company. According to the report published by Clal, Macrolink expressed concerns with respect to the regulatory uncertainty. The report also states that Macrolink met with the Regulator and that recent development, news and transactions in the Israeli insurance market have raised concerns for them.

It is difficult to ignore the connection between these two recent developments. In both cases a Chinese conglomerate was in advanced stages of negotiations to acquire an Israeli insurance company and their ultimate decision not to do so may have been based, at least in part, on concerns regarding their ability to obtain regulatory approval. While we cannot know whether regulatory approval would ultimately have been granted and, if not, why, it would be naïve to ignore the public atmosphere surrounding Chinese acquisition of two of Israel’s leading insurance companies and how that could have potentially influenced the regulator or, at the very least, how it may have led the Chinese purchasers to believe that regulatory approval would not be forthcoming.

In the run up to the sale of Israel’s Tnuva food conglomerate during 2014 to China’s Bright Food, Israel’s media was filled with politicians, media personalities and average citizens criticizing the deal and lamenting the transfer of what they considered to be a national institution to foreigners. The problem was, of course, that Tnuva was already controlled by foreigners, the UK’s Apax Partners. Could it be that some Israelis view Chinese investors as “more foreign” than English investors?

That brings us to 2015 and the proposed Chinese acquisitions of both Clal Insurance and Phoenix Insurance. Both proposed transactions were met with concerns about China taking over a large portion of Israel’s insurance industry and the retirement savings of millions of Israelis. In light of the general negative atmosphere in the Israeli media and public opinion, it must be asked whether such negative opinion would have existed if the buyers had been European or American rather than Chinese.

China has become an economic superpower and its influence in the world will only continue to rise. The Chinese interest in Israel has been increasing rapidly in the past few years and so far the good relationship has been beneficial to both countries.

Israeli companies have enjoyed the involvement of Chinese investors not only for the capital they bring and increased competition between potential investors, but also due to the access they provide to China’s large and growing markets. The Chinese market, on the other hand, has gained a great deal of new innovative technology in many fields essential to China’s growth. The 2014 ChemChina-ADAMA transaction is an excellent example of how a Chinese investment in Israel can create a win-win situation.

In the short term, we believe that we may see reduced Chinese interest in investing in regulated industries such as banking and insurance while Chinese interest will continue to be strong where governmental approval is not required, such as Israel’s hi-tech industry. However, in the medium and long term, it would serve Israel well to overcome any prejudices that some Israelis may unwittingly suffer from and focus on objective and relevant criteria when examining a transaction in order to bring more successful deals to completion.

This article was co-authored by David Hodak, Adv. and Eli Barasch, Adv. Mr. Hodak heads the Tel Aviv law firm Gross, Kleinhendler, Hodak, Halevy Greenberg & Co. and the firm’s Asia Practice.

Mr. Barasch heads the firm’s China Desk. His practice has focused primarily on China-Israel cross border transactions since 2004.

Adi Weitzhandler, Adv., an associate at the firm’s China Desk, has extensive experience in the Chinese market. She is conversationally fluent in Chinese and studied at the Beijing Language and Culture University, Beijing, China.