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Israel & China Economic Ties: Growth & Potential

It appears on the surface to be an unlikely partnership, but the most populous country in the world wants - and needs - Israeli technology
Wall Street Journal editor Bret Stephens speaks at the Foreign Trade Conference in Tel Aviv (Photo credit: Courtesy)
Wall Street Journal editor Bret Stephens speaks at the Foreign Trade Conference in Tel Aviv (Photo credit: Courtesy)

Together, Israel and China have a population of around 1,365,000,000 people. That’s an old quip (Israel only has around 8 million citizens to China’s 1.357 billion), but the truth is, the two countries do share an economic synergy which makes the whole far greater than the sum of its parts.

China is one of the world’s fastest growing economies and its largest manufacturer.

Israel, with relatively negligible manufacturing muscle and a tiny local market, is, nevertheless, renowned as one of the great hubs of innovation in the world.

Though Israel is smaller population-wise than many Chinese cities, there is a logical fit in this burgeoning economic romance. Combine China’s thirst for innovation with Israel’s ongoing pursuit of new markets, and you get a growing phenomenon which is helping transform the Israeli economy: a move eastward.

Though Israel’s key trading partners remain Europe and the US – together they account for more than 50% of Israel’s $90 billion in goods and services exports – those trends are shifting. In fact, Asia this past year surpassed the U.S. as Israel’s second largest trading partner, after Europe.

Bilateral trade with China has skyrocketed almost 200x in the past decade, with volume leaping from $50 million in 1992 to almost $11 billion in 2013. The stage is set for even greater growth in the coming years.

One additional factor fueling this great leap: China is facing a myriad of challenges well-suited to industries in which Israel is a world leader.

So, for example, with its huge population, growing urban and industrial centers and enormous agricultural demands, China is currently facing an acute water challenge. Enter Israel. Israel is one of the world’s leaders in technology for managing, maximizing and recycling water and this technology is currently being put to use to meet China’s water needs head on.

Recently, our Minister of Economy Naftali Bennett launched the flagship “Water City” project in China, announcing that the city of Shougang in the Shandong province would be the focus of Israel’s water-related activities in the country. This centre of excellence for Israeli “water-tech” features world-leading Israeli innovation in such areas as drip irrigation and waste-water recycling.

There has also been a real awakening of late by Chinese investors looking to Israel for leading-edge technology and knowhow.

China’s largest search engine Baidu and e-commerce giant Alibaba have both recently invested in Israeli startups. Renowned Hong Kong investor Li Ka-shing was one of the early investors in Waze, the Israeli navigation app famously acquired by Google for over $1 billion. He has since invested in other leading Israeli startups, and recently committed $130 million to the Technion, the Israel Institute of Technology – the largest donation in the university’s history.

These are just a few examples of the growing activity by the Chinese in Israeli hi-tech.

Our government is playing a significant role in helping bolster growing Israeli-Chinese business ties. Israeli Prime Minister Benjamin Netanyahu’s 2013 visit to China has gone a long way to improving commercial relations between the two nations.

And our efforts continue. We are hoping that historic negotiations for a Free Trade Agreement between Israel and China will be kicking off as early as next year, foreshadowing a new era of cooperation. China was second only to the U.S. in joint R&D projects with Israel, spearheaded by our Chief Scientist’s Office. This past year, Israeli and Chinese inter-ministerial groups met to discuss opportunities for additional collaboration between the Israeli and Chinese hi-tech sectors.

The Foreign Trade Administration in the Ministry of Economy, which I head, enjoys trade missions in such key financial hubs as Beijing, Shanghai, Guangzhou and Hong Kong, promoting trade and joint ventures and building relationships between investors and companies from both countries. We will soon be adding more. We are also offering significant grants and mentoring to Israeli companies looking to penetrate the Chinese market.

This past May, the Israeli government set a goal of doubling exports to China within five years. I believe that the sky is the limit when it comes to the future of Israel-Sino bilateral trade, and we at the Ministry of Economy are working tirelessly to make that goal a reality.

About the Author
Ohad Cohen, BA, MBA, heads the Foreign Trade Administration at the Israeli Ministry of Economy, where his responsibilities include the development and implementation of Israel’s foreign trade policy and managing Israel’s foreign commercial service, which includes 40 trade offices operating in more than 50 countries. From 2007 to 2012, Ohad served as the Commercial Attaché at the Embassy of Israel in Washington, where he was in charge of promoting and facilitating trade and investment between Israel and the United States, and to enhancing bilateral commercial relations. Ohad Cohen, who started his career at Zim Integrated Shipping Services, a large maritime container carrier, joined the Foreign Trade Administration in 1997, where he has since held increasingly senior positions.
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