According to the foreign investment report of the Chief Economist at the Ministry of Finance, which was published last Wednesday, China and Hong Kong are in third place in terms of the volume of incoming investments (FDI) in Israel. In 2020, the total value of transactions is estimated at approximately 26.5 billion dollars, with the country of origin of 80 % of investors in Israel this year was the USA, other source countries for investors (7.4%) are European countries, and investments from China and Hong Kong accounted for close to 7% of investments.
2% of investors come from Great Britain, 2% from Japan and only 1% from Germany.
Visitors to the Huawei event in Beijing // Photo: AP,
China's economic involvement in Israel has expanded over the past decade, and Chinese companies have invested in many Israeli companies, especially in the field of technology.
"The Chinese see Israel as a source of innovation and entrepreneurship and they want to learn from us to develop technologies," explains Dr. Doron Ella, a China researcher and lecturer at the School of Political Science at the University of Haifa. The Chinese say that Israel is good at producing from 0 to 1, that is, inventing things, and the Israelis are good Bringing from 1 to 100. We have complementary economies - Israel is good at innovation and development, and China's relative advantage is that it has the ability to produce, it has a huge market of its own and also access to world markets."
Purchase of playtics
Among the prominent and well-known examples are the purchase of Playtica by a Chinese company for 4.4 billion dollars, the purchase of Israeli Toga Networks by the Chinese telecom giant Huawei, the purchase of Tnuva by the Chinese Brightfood for 8.6 billion shekels, the investments in the ports of Haifa and Ashdod, on the red line of the light rail in Gush Dan, and more.
China's investment in Israel is carried out through investment funds or through private/government companies.
The big Chinese companies are setting up investment funds for themselves aimed at investing abroad.
The Israeli Playtica company, photo: PR
However, Ella points out that since 2018 the number of Chinese investments in Israel has been on a downward trend.
In his estimation, in the first half of the year only 12 transactions were carried out by the Chinese in Israel.
This compares to 34 transactions last year and about 50 transactions in 2020.
The reasons for this lie first and foremost in the change of priorities in China itself, in the consequences of the Corona epidemic, and possibly also in the change of the investment environment in Israel regarding Chinese companies, as part of the American political pressure.
"Government companies from China invest mainly in the infrastructure sector in Israel, while private companies and venture capital funds focus on the high-tech sector. Contrary to the impression created by public criticism in the American media, Chinese investments accounted for slightly less than 10% of the total foreign capital invested in Israel, far behind investments from the United States and Europe However, the main source of concern is related to Chinese investments in areas of technology that are considered sensitive, without a direct connection to their scope," Ella writes in his research on the subject.
In this context, it should be noted that in accordance with the decision of the Ministerial Committee for National Security Affairs, it was decided to establish an advisory committee in the Ministry of Finance to examine national security aspects of foreign investments, which is the body entrusted with screening foreign investments in Israel.
Foreign investment database
The committee is chaired by the Chief Economist at the Ministry of Finance, and its members are representatives of the Ministry of Defense and the National Security Council, as well as observers from the Ministries of Economy, Finance, Foreign Affairs and Justice.
From the date of its establishment until the end of 2021, the committee held over 20 discussions that dealt with potential foreign investments in the economy in a total amount of approximately NIS 43 billion.
Dr. Doron Ella, China researcher and lecturer at the School of Political Science, Haifa University,
At the same time as the committee, a foreign investment database was established in the Chief Economist Division of the Ministry of Finance, which is responsible for systematically monitoring foreign investments entering Israel.
The database makes it possible to analyze trends, deepen the acquaintance with investors in Israel and track sensitive investments.
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