23 October 2018
Li Ka-shing’s venture capital arm Horizon Ventures made a spectacular return on its investments in Israeli GPS-based mapping software firm Waze (acquired by Google in 2013) in less than two years. Credit: Neurogadget
Li Ka-shing’s venture capital arm Horizon Ventures made a spectacular return on its investments in Israeli GPS-based mapping software firm Waze (acquired by Google in 2013) in less than two years. Credit: Neurogadget

Li Ka-shing leads flood of Chinese investment into Israel

Last week (June 25-26), Hong Kong hosted the Third China-Israel Investment Summit, attracting more than 120 Israeli innovation start-ups and 300 investors from Hong Kong and the mainland.

“China and Israel are a great match of strategic partners, to provide ultimate and long-term benefits under the great economy of China and top technological innovations in R&D companies,” Zvi Heifetz, Israel’s ambassador to China, told the gathering.

It was the latest episode in a remarkable love affair that has made China the biggest foreign investor in Israel, surpassing the United States. In 2016, this investment reached a record US$16.5 billion, most of it to buy internet, cyber-security and medical device start-ups.

On June 15, Technion Institute of Technology, the MIT of Israel that is based in Haifa, announced a US$200-million venture capital fund to invest in science and technology companies. It will be jointly managed by Technion Research & Development Foundation and Hong Kong-based UG Capital Management, with offices in Israel and Hong Kong.

The pioneer of this Chinese investment is Li Ka-shing. In 1999, Hutchison Telecom won Israel’s third mobile network operating license, together with two Israeli firms. In 2008 Hutchison Whampoa set up a water treatment company in Israel, specializing in desalination, water treatment, wastewater treatment and other water technologies.

Over the last five years, Horizon Ventures, Li’s venture capital arm, has put money into many of Israel’s most innovative companies, a total of more than 24 investments.

One of the most successful was Waze, a GPS-based map software company founded in 2006 by three Israelis. Its traffic and navigation app works on smartphones and tablets and provides real-time information and travel times and route details submitted by users.

In October 2011, Horizon Ventures and Kleiner Perkins Caufield and Byers invested US$30 million in Waze. In June 2013, Google paid US$1.3 billion to acquire it; with an 11 per cent stake, Horizon Ventures earned an estimated US$143 million, a spectacular return in less than two years.

That year Li donated most of his profits, US$130 million, to Technion, the largest gift it had ever received. In exchange, the institution is setting up the Technion Guangdong Institute of Technology, a joint venture with Shantou University in Li’s native place, founded in 1981 with a HK$6 billion donation from the Hong Kong billionaire.

Li wants to give Chinese students the opportunity to learn cutting-edge technology in the sectors that will drive the economy of the future.

It will open its doors this autumn, with 2,960 students for the first 10 years, in chemical engineering, biotechnology and food engineering and materials engineering.

In his address at the ground-breaking ceremony in December 2012, Professor Peretz Lavie, Technion’s president, said: “The outcomes of this historic project will affect the whole of humanity.”

During his visit to the campus on June 26 for the annual graduation ceremony, Li and his son Richard toured the site of the new Technion institution to see how the building work is progressing.

Seeing Li’s success, mainland firms followed his example, including Lenovo, Fosun, Xiaomi, Baidu and Alibaba. Huawei and Haier have also established R&D centers there.

At the last China-Israel summit in Tel Aviv in September 2016, Chinese IT firm Neusoft and Infinity Group, a Sino-Israeli private equity fund, set up a US$250 million investment fund and platform for Israeli med-tech companies operating in China.

Amir Gal-Or, founder of the Infinity Fund, said: “Neusoft is considered China’s biggest IT corporation, with a 50 percent share of the health market in China specializing in developing software for the industrial sector.”

At the summit last week, speakers emphasized the important role for Hong Kong in Sino-Israeli relations. “China is moving from low-value material-intensive manufacturing to high-tech research and development,” said Wong Pik Kuen, CEO of HSBC’s China business. “China’s capital and Israel’s technological research ability can complement each other. Hong Kong can play the role of intermediary.

“Last year China’s investment in Israel was 10 times more than in 2015. The PRD [Pearl River Delta] is increasingly like Silicon Valley. A large portion of Shenzhen’s listed firms are in high-tech and their R&D spending is 4 percent of GDP, twice the national average.

“On the southern tip of the PRD, Hong Kong can serve as an intermediary between the mainland and Israel. With the opening of the high-speed train to Guangzhou and the bridge of Zhuhai, the traveling time with the mainland will be reduced. Hong Kong is an international finance center and the second largest private placement capital center in Asia,” she said.

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Hong Kong-based writer, teacher and speaker

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