A Policy-Oriented Think Tank Addressing Foreign Policy and National Security Issues for a Safe Israel

Biden, Israel, and China: Making a Difficult Threesome Work

It is wrong to expect Israel, a middle-level economy, to decouple from China when far wealthier countries (including the United States) show no signs of following suit. Israeli companies should not be subject to restrictions not placed on companies elsewhere, including the United States itself.
BIDEN speaks during a virtual summit with Chinese President Xi Jinping, Israeli Prime Minister Naftali Bennett

Some problems cannot be solved but instead must be managed. So it is with American efforts to pressure Israel to curtail its burgeoning relationship with China.

The United States has legitimate concerns that Israeli ties with China strengthen its principal adversary. Israel, however, is also correct in believing that growing links with China play an important role in ensuring its continuing prosperity.

The daunting challenge for Israel is to continue its relationship with China while not alienating its key American ally. On the optimistic side, there are already signs that the China issue has become less toxic under the Biden Administration. Nevertheless, the potential for continued friction remains, especially if Washington attempts to play the “China card” to pressure Israel to become a more obedient ally.

American concerns that China will use its dealings with Israel to steal technology, improve its military, and spy on the United States have roiled US-Israeli relations for decades. Washington’s anger at Israeli arms sales to China (notably the PHALCON and HARPY deals) went so far as to force Israel to end its lucrative military trade with Beijing in the early 2000s. Instead of ending their relationship, Israel and China defied expectations by developing robust non-military ties focusing on technology and infrastructure, resulting in China becoming one of Israel’s largest trading partners and its number one source of imports.

If Israel believed that restricting its aid and trade with China to non-military areas would abate American criticism, it was sorely disappointed. Washington continued to hammer away at Israel, arguing that China’s construction of a container facility at the Haifa port would be used to spy on America’s Sixth Fleet (which occasionally makes port calls at Haifa) and that China’s mammoth investment in Israeli infrastructure would enable it to compromise American and Israeli security, and that China’s investment in Israeli tech firms—especially those that also did defense work with the United States—would create a “back door” exposing American secrets.

Tensions proved incredibly high during the Trump Administration, including an emergency visit by former Secretary of State Mike Pompeo that forced Israel to reject a Chinese bid to build the critical Sorek 2 desalinization plant. Threats to limit intelligence cooperation with Israel unless it got serious about restricting ties with China were a rare bone of contention in former prime minister Benjamin Netanyahu’s otherwise friendly relations with former president Donald Trump.

China has become less of a divisive issue under the Biden Administration. Despite earlier concerns relayed to the Israelis by CIA Director William Burns about Chinese investments in the tech sector and infrastructure, China was mentioned only in passing when Prime Minister Naftali Bennett met with President Joe Biden and other senior American officials in August. When concerns with China were raised, Bennett followed a familiar pattern of agreeing to establish a better vetting system for Chinese (and other foreign) investors and keep Washington in the loop regarding future Chinese deals.

Israel apparently passed the first test of the new relationship when it refused to allow Chinese companies to build additional Tel Aviv light rail lines in January. Bennett’s assurances and his personal chemistry with American leaders have made China less of an impediment to friendly US-Israeli relations.

Nevertheless, it would be foolish to believe that the China issue will go away. American officials will continue to worry about any efforts to enhance China’s military might. Israel will persist in seeking trade and investment opportunities from China, some of which will antagonize the U.S.  Complicating matters further may be American efforts to exploit its concerns with Israeli Chinese dealings to push Israel in other areas, such as making it condemn Chinese human rights abuses or to take a harder line against Russia as a sign that it is not under Beijing’s thumb.

Moving forward, Israel needs to be responsive to Washington’s concerns about any action that strengthens China. Bennett’s agreement to establish an oversight board with teeth that regularly consults with American officials will go a long way in preventing misunderstandings that can get out of hand. The board, however, must be a serious undertaking and not simply a sop to the Americans that will ease its restrictions as soon as Washington’s attention turns elsewhere.  It would be best if the board did not merely react to American pressure but, on its own, rejected Chinese deals that it knew would raise Washington’s ire. Over time, this hopes to enhance America’s trust in Israel’s willingness to say no to Chinese involvement in sensitive areas.  

Working to better vet and monitor Chinese investments would improve relations with the United States. It would also meet the demands of Israeli officials, especially those whose focus is national security. It would be a mistake to assume that efforts to restrict Chinese investments stem only from the United States. Many Israeli officials also worry that efforts to maximize profit do not consider Israeli security needs adequately. Making sure that deals with China serve the Israeli national interest instead of the earnings of some corporations meets Israeli needs as much as those of the United States.

If Israel must do more to meet American demands, the United States should also make a greater effort to be sensitive to Israeli interests. China plays an important role in Israel’s economy, a role that America and the West are not prepared to replace. Israel turns to China for investment in infrastructure because Chinese firms deliver high quality at a price that others do not match.

Similarly, Chinese investment in Israeli high tech enables Israeli start-ups to get much-needed funding and expertise on terms that are unavailable elsewhere.  

It is wrong to expect Israel, a middle-level economy, to decouple from China when far wealthier countries (including the United States) show no signs of following suit. Israeli companies should not be subject to restrictions not placed on companies elsewhere, including the United States itself. Nor is it helpful to link Israel’s ties with China to other areas of Israel’s relationship with the United States.

Neither the Biden nor the Bennett Administrations show signs that they will allow China to disrupt the strong ties that bind Israel to America. But differences of opinion are sure to emerge. Those differences need to be resolved with the recognition that America’s legitimate concerns can be met without depriving Israel of the benefits of a robust relationship with an economic superpower.

JISS Policy Papers are published through the generosity of the Greg Rosshandler Family.

Photos: IMAGO-IMAGES/Haim Zach/Israel Gpo, IMAGO-IMAGES/Sarah Silbiger – Pool via CNP

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