Israel’s Balancing Act in the US–China Rivalry

Every so often, foreign policy throws a country into a tight corner. For Israel, that corner lies somewhere between Washington and Beijing. The rivalry between the United States and China is no longer a distant power struggle. It is reshaping how countries think, trade, and align. And for a country like Israel-geographically small but deeply tied to both superpowers in different ways, this rivalry has quietly turned into one of its toughest strategic balancing acts in recent memory.

For decades, Israel’s security has leaned on its close alliance with the United States. Washington has been more than a partner; it’s been the backbone of Israel’s military, diplomatic, and technological strength. From military aid totaling tens of billions of dollars under successive US–Israel Memoranda of Understanding to diplomatic cover in international forums, the US has consistently been Israel’s anchor. But China’s rise has changed the equation. Beijing is no longer just an economic actor; it’s a strategic investor, a technological competitor, and a growing presence in the Middle East that Israel must reckon with.

Take the Haifa port as an example. A Chinese company, the Shanghai International Port Group, won the concession for the new Bay Port at Haifa, triggering concerns in US and Israeli security circles. The southern Ashdod port has even publicly raised “strategic risk” over the Chinese-operated terminal up north. American officials have also voiced worries about Chinese investment in Israel’s high-tech sectors, focusing on risks such as dual-use technologies and intelligence vulnerabilities. In Washington’s view, such ties could expose Israel to security compromises just when US–China competition is intensifying.

From Jerusalem’s perspective, though, the calculus is different. China is one of Israel’s largest trading partners. In 2024, Israel’s trade with China (including Hong Kong) was around USD 20.08 billion in goods alone. Many trade and investment projects—in infrastructure, energy, and tech, have Chinese involvement. . For Israel’s innovation-based economy, capital access, new markets, and foreign investments are not trivial.

At the same time, Israel knows exactly where its security umbrella comes from. Its edge in defense technology, its diplomatic leverage, and its military support network all stem from the US. That relationship isn’t just helpful, it’s existential. This tension has already shown up in policy. In October 2019, after pressure from Washington, Israel’s Security Cabinet decided to establish a mechanism to vet foreign investments for national security risks. This gave birth to the Advisory Committee for Evaluating National Security Aspects of Foreign Investments, which began operating in January 2020. While this is a step toward oversight, it is still far less comprehensive than the US CFIUS regime. As the US tightens its own rules on Chinese investment, Washington expects allies like Israel to follow suit.

Meanwhile, China has not been sitting still. It’s steadily increasing its footprint in the Middle East, from trade to diplomacy. One prominent signal was its mediation between Saudi Arabia and Iran in 2023, culminating in a Beijing-brokered agreement to restore diplomatic ties. For Beijing, Israel represents both opportunity and strategic signaling — a tech powerhouse in a volatile region.

For Israel, the choice is not straightforward. Cutting China off entirely would hurt its economy and could push Beijing closer to adversaries like Iran. But leaning too far toward China would unsettle Washington at a time when US backing is more critical than ever.

So Israel is walking a tightrope. It’s tightening scrutiny of sensitive sectors while keeping less sensitive trade open. It’s a dance — one that doesn’t always go unnoticed in Washington. Looking ahead, Israel may need firmer institutional structures to manage this delicate balance. Drawing on lessons from Australia’s FIRB or the U.K.’s National Security and Investment Act could help. Strengthening transparency, expanding the sectors under review, and setting clearer rules will all be key.

But ultimately, this is not just a story about trade rules or laws. It’s about how Israel positions itself in a fast-changing world. The US–China rivalry is not fading; it’s reshaping global power structures in real time. For Israel, ambiguity is dangerous, but cutting off China outright is short-sighted. Finding that balance will not be easy. It will require clear-headed diplomacy, legal clarity, and long-term strategy that centers Israel’s own national interests, not as a pawn between great powers, but as a deliberate strategic actor in its own right.