It's kosher: Israel embraces Chinese investment

May 15, 2015 09:26
Tnuva is being acquired by China's Bright Food in a deal that values Israel's largest dairy company at US$2 billion. Photo: Haaretz

It may not be true that China is eating more cheese these days, but if nothing else, its corporate hunger for Israel's dairy companies is proof mainland investors want more of them.

Which perhaps explains why one in 10 of the delegates to Agrivest, an agricultural technology conference held recently in the Israeli city of Rehovot, came from China. 

Chinese money has arrived in Israel only recently, and so far, it has run into relatively little political backlash, even on critical infrastructure projects such as the new 3.3 billion shekel (US$864 million) port being built in the Mediterranean city of Ashdod by China Harbor, the Financial Times reported Friday.

The Chinese experience in Israel stands in contrast with the United States, where officials blocked a Chinese investment in wind farms in 2012 and more recently raised concerns that the Chinese government is linked to hacking attacks on US defense contractors.

Benjamin Netanyahu — who is set to take the helm of a new government in a few days — has been actively pursuing a policy of pivoting trade relations away from Europe, still Israel’s biggest commercial partner, and toward emerging markets.

The goal is both pragmatic and political.

Some European countries have been sharply critical of what they see as Israeli intransigence in the unresolved conflict with the Palestinians, and Israeli officials fear political repercussions.

“Sometimes you say ‘the state of Israel’ in other regions of the world, and there are other things that come up in their minds,” says Ophir Gore, Israel’s trade attache in Beijing.

“When you say ‘Israel’ in China they think innovation, they think high technology — so in that aspect, my job here is pretty easy.”

Israel’s trade turnover with China reached US$11 billion last year, about double the amount recorded in 2010.

However, China still accounts for less than 10 per cent of overall Israeli trade while a third goes to Europe and a quarter to North America.

With its billion-plus population, China can in turn serve Israel as both consumer market and commercial partner.

“We are great inventors and brilliant at developing things,” said Todd Dollinger of Trendlines, a technology investment company that organised Agrivest.

"But our production capabilities are nowhere near the ability of China, and we are very far from major markets — we are effectively an island, and we do best when we partner.”

When Bright Food recently won official approval from Beijing to buy control of Tnuva, Israel’s biggest dairy company, in a deal that values the latter at US$2 billion, the Chinese company said its was making the purchase because Israel is "well known for its agriculture and the quality of its agricultural management”.

The deal was the biggest Chinese buyout of an Israeli company since 2011 when China National Chemical Corp. bought Adama, the pesticides and crop protection company then known as Makhteshim Agan, for US$2.4 billion.

Israel’s economy ministry says that in addition to the big deals like Adama and Tnuva, Chinese investment is going into smaller companies, notably in technology, agrotechnology and water management.

Baidu, China’s largest search engine, has put US$3 million into Pixellot, an Israeli video capture start-up and provided funds to Carmel Ventures, an Israeli venture capital firm.

In November, Shouguang, on China’s coastal plain, launched a “Water City” project meant to showcase Israeli innovations for water reuse and desalination.

The first contracts are expected to be signed by the end of this year and should be operational by 2017.

In January, Chinese e-commerce giant Alibaba invested an undisclosed sum in Visualead, an Israeli company specialising in QR code technology.

Chinese companies are pushing deeper and further into Israel than ever before and Israeli companies and government officials are returning the embrace.

“There seems to be a kosher stamp from the government on both sides to let these trade relations blossom and bloom,” says Jon Medved, founder and chief executive of OurCrowd, the Israeli crowdfunding company.

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