◼ POLITICS Bloomberg Businessweek September 16, 201935JACKGUEZ/AFP/GETTYIMAGESto build a new mass-transit system in Tel Aviv.
Developing some kind of Cfius-like process is
now under discussion at the highest levels of the
Israeli government, according to two people famil-
iar with the matter who asked for confidentiality
to discuss the private deliberations. On one side
is the defense establishment, which has argued
for tighter controls, while on the other are finan-
cial officials, who are wary of anything that could
impede foreign capital flowing into the country.
It’s possible that whatever comes out of the con-
versations would focus solely on strategic, regu-
lated sectors such as defense and energy, therebyfalling short of addressing U.S. concerns.
Despite the hand-wringing on both sides, it’s
tough to imagine Israel won’t choose the U.S.
over China. In July, Israel began soliciting bids
for 5G mobile telecommunications frequencies.
The man in charge, Minister of Communications
David Amsalem, says the issue of foreign invest-
ment is complicated. “It’s not like buying some
shoes,” he says. So will Huawei Technologies Co.,
the Chinese giant and frequent Trump target, be
allowed to participate? Amsalem’s reply: “Go to the
next question.” �Ivan LevingstonTHE BOTTOM LINE Whether or not Netanyahu prevails in his bid
for reelection, Israel’s economy will remain dependent on China’s
continued investment, potentially alienating the U.S.brokered a secret meeting between representatives
that led to Israeli arms sales to China. Diplomatic
relations were formalized in 1992. In the early
2000s, the U.S. successfully pressured Israel to
cancel a sale to China of its Phalcon radar system,
as well as parts for the armed Harpy drones it had
already sold them. But the Sino-Israeli relationship
recovered. In the past few years, Chinese invest-
ment in the country’s tech sector has increased
sharply, reaching about a quarter of all funds
raised by Israeli tech companies in the third quar-
ter of last year, data from the Israeli high-tech
tracker IVC Research Center show.
As recently as October, Netanyahu hailed the
“natural partnership” between Israel and China as
he hosted Vice President Wang Qishan at a meeting
of the Israel-China Joint Committee on Innovation
Cooperation in Jerusalem. Since then, a string of
U.S. officials have taken issue with the relationship,
including recently ousted national security adviser
John Bolton and Secretary of State Mike Pompeo,
who threatened to limit intelligence sharing with
Israel unless the country falls in line.
The Haifa seaport in particular has been a
cause for concern because of its proximity to a
harbor used occasionally by the U.S. Navy’s Sixth
Fleet. Although the two facilities are separated by
a breakwater and an older commercial port, the
U.S. Senate passed a defense spending bill that
includes a provision expressing “serious security
concerns” about the development. Zhan Yongxin,
China’s ambassador to Israel, pushed back with
an op-ed in Israeli daily Haaretz in August, argu-
ing that “the win-win cooperation between China
and Israel” ought to be “respected.”
“Using Chinese contractors to build some of our
infrastructure is very important for Israel because
there are very few infrastructure builders in the
world,” says Avi Simhon, Netanyahu’s top economic
adviser. “If we have additional competition for these
projects, that could save us many billions of dollars.”
The Shanghai group was the only operator to sub-
mit a complete bid for the Haifa port, and multiple
Chinese companies are bidding against one anotherDATA: INTERNATIONAL MONETARY FUND, BLOOMBERGChina’s Rapid Rise in Israel
Value of Israel’s trade with its current top partners
1998 2018China Turkey India Switzerland Hong
KongNetherlands South
KoreaU.S. U.K. Japan Germany France Italy BelgiumSingapore$31.5b$8.4b $8.3b $7.6b$11.5b $14.2b▲ Haifa’s port◼ POLITICS Bloomberg Businessweek September 16, 201935JACK
GUEZ/AFP/GETTY
IMAGES
tobuilda newmass-transitsysteminTelAviv.
DevelopingsomekindofCfius-likeprocessis
nowunderdiscussionatthehighestlevelsofthe
Israeligovernment,accordingtotwopeoplefamil-
iarwiththematterwhoaskedforconfidentiality
todiscusstheprivatedeliberations.Ononeside
isthedefenseestablishment,whichhasargued
fortightercontrols,whileontheotherarefinan-
cialofficials,whoarewaryofanythingthatcould
impedeforeigncapitalflowingintothecountry.
It’spossiblethatwhatevercomesoutofthecon-
versationswouldfocussolelyonstrategic,regu-
latedsectorssuchasdefenseandenergy,therebyfallingshortofaddressingU.S.concerns.
Despitethehand-wringingonbothsides,it’s
toughtoimagineIsraelwon’tchoosetheU.S.
overChina.InJuly,Israelbegansolicitingbids
for5Gmobiletelecommunicationsfrequencies.
Themanincharge,MinisterofCommunications
DavidAmsalem,saystheissueofforeigninvest-
mentiscomplicated.“It’snotlikebuyingsome
shoes,”hesays.SowillHuaweiTechnologiesCo.,
theChinesegiantandfrequentTrumptarget,be
allowedtoparticipate?Amsalem’sreply:“Gotothe
nextquestion.”�IvanLevingstonTHE BOTTOM LINE Whether or not Netanyahu prevails in his bid
for reelection, Israel’s economy will remain dependent on China’s
continued investment, potentially alienating the U.S.brokereda secretmeetingbetweenrepresentatives
that led to Israeli arms sales to China. Diplomatic
relations were formalized in 1992. In the early
2000s, the U.S. successfully pressured Israel to
cancel a sale to China of its Phalcon radar system,
as well as parts for the armed Harpy drones it had
already sold them. But the Sino-Israeli relationship
recovered. In the past few years, Chinese invest-
ment in the country’s tech sector has increased
sharply, reaching about a quarter of all funds
raised by Israeli tech companies in the third quar-
ter of last year, data from the Israeli high-tech
tracker IVC Research Center show.
As recently as October, Netanyahu hailed the
“natural partnership” between Israel and China as
he hosted Vice President Wang Qishan at a meeting
of the Israel-China Joint Committee on Innovation
Cooperation in Jerusalem. Since then, a string of
U.S. officials have taken issue with the relationship,
including recently ousted national security adviser
John Bolton and Secretary of State Mike Pompeo,
who threatened to limit intelligence sharing with
Israel unless the country falls in line.
The Haifa seaport in particular has been a
cause for concern because of its proximity to a
harbor used occasionally by the U.S. Navy’s Sixth
Fleet. Although the two facilities are separated by
a breakwater and an older commercial port, the
U.S. Senate passed a defense spending bill that
includes a provision expressing “serious security
concerns” about the development. Zhan Yongxin,
China’s ambassador to Israel, pushed back with
an op-ed in Israeli daily Haaretz in August, argu-
ing that “the win-win cooperation between China
and Israel” ought to be “respected.”
“Using Chinese contractors to build some of our
infrastructure is very important for Israel because
there are very few infrastructure builders in the
world,” says Avi Simhon, Netanyahu’s top economic
adviser. “If we have additional competition for these
projects, that could save us many billions of dollars.”
The Shanghai group was the only operator to sub-
mit a complete bid for the Haifa port, and multiple
Chinese companies are bidding against one anotherDATA:INTERNATIONALMONETARYFUND,BLOOMBERGChina’sRapidRisein Israel
ValueofIsrael’stradewithitscurrenttoppartners
1998 2018China Turkey India Switzerland Hong
KongNetherlands South
KoreaU.S. U.K. Japan Germany France Italy BelgiumSingapore$31.5b$8.4b $8.3b $7.6b$11.5b $14.2b▲ Haifa’s port