JISS - The Jerusalem Institute for Strategic Studies

In the past decade, relations between Israel and China have become closer, following a decision in Jerusalem to diversify and expand Israel’s ties with emerging powers and countries that do not belong to the European Union and are less identified with the American coalition. The visit to Israel by China’s vice president is evidence of the warming of relations between the two countries.

The official visit to Israel this week by Chinese Vice President Wang Qishan was the first by such a senior Chinese officeholder in over a decade. The visit by Wang, a childhood friend of Chinese President Xi Jingping who is believed to have very close relations with Wang, is evidence of the strengthening ties between Israel and China.

This rapprochement is the result of a change in concept and policy decided by Prime Minister Benjamin Netanyahu when he was elected in 2009. Underlying this new conception is a switch in Israel’s foreign and economic policy from an almost exclusive reliance on the European Union and the United States to opening Israel’s economic market and diplomacy to other continents, particularly emerging powers and giant economies, while maintaining a balance in ties with the rival forces in Asia.

Netanyahu has marked China as a key target for expanding civilian cooperation, mainly in technology. He has accordingly visited China twice as prime minister: in 2013 and 2017. During his 2017 visit, 25 cooperation agreements were signed in a range of spheres. The Chinese estimate the actual value of these agreements at $2 billion. During his visit, it was also agreed to expedite the establishment of a free trade zone between Israel and China. As part of that visit, China launched a direct civil aviation route between Shanghai and Tel Aviv.

With a population of 1.4 billion and an annual growth rate of 6.5%, China is regarded as a global power and a huge economy that is rapidly catching up to the United States as the leading power in the global market, so Israel naturally has an interest in closer relations with it in the framework of the new Israeli foreign policy. January 2017 marked the 25th anniversary of the commencement of diplomatic relations between Israel and China. In a certain sense, the connection between the two countries since then has been like the connection between Israel and Russia. Exactly like the interests of Russia and Israel, the interests of China and Israel do not always coincide, and several of the reasons for this are similar.

For a long time, relations between the United States and Israel have been an obstacle and have constituted a glass ceiling for deeper economic and diplomatic cooperation between Jerusalem and Beijing. This situation is a result of the hostility and competition that have emerged in recent decades between the United States and China since the end of the Cold War (during which the latter two countries had common interests against Soviet “hegemony”).

As Graham Allison warned in his book, “Destined for War – Can America and China Escape Thucydides’s Trap,” the rise of a new power to center stage has more than once resulted in conflict, and even war, with the power that was previously dominant. Due to the close relations between Israel and the United States, China regards Israel as belonging to the American-Western coalition.

This tripartite tension was expressed in 2000, when Israel called off the sale of its Phalcon intelligence and control aircraft to China under undisguised American pressure, thereby causing great anger in the Chinese government. A similar crisis arose in 2005, when Israel canceled, against under American pressure, accompanied by personal sanctions against senior Israeli defense establishment figures, an agreement to supply and repair spare parts for unmanned aerial vehicles (UAVs).

Relations between China and Iran: Where its foreign policy is concerned, China still divides the world into the American-Western coalition and the opposing coalition, albeit not with the same ideological animus as in the past. In this case, Iran is perceived as an ordinary anti-Western country hostile to the United States. China therefore sees Iran as a tool for restraining and countering American policy in the world. Over the years, China has allowed transfers of military technology, including military nuclear components and know-how, from North Korea to Iran and Syria. In addition, China has an economic interest in Iran, being Iran’s biggest trade partner and the number one destination for Iranian oil exports. Trade between the two countries totaled $52 billion in 2014, and in January 2016, they signed trade agreements worth $600 billion in the ensuing decade. This is also the reason why China refused to go along with the Obama administration’s economic sanctions against Iran, and is also refusing to do so in the Trump administration’s current round of sanctions.

Another weighty issue, although a more marginal one, concern’s China’s views on the Israeli-Palestinian conflict. While China is attempting to maintain good relations with Israel, and now realizes that there is no zero-sum game and its relations with Israel are not at the expense of relations with Saudi Arabia and other key countries, it has still not finally escaped its fear that a close association with Israel is liable to be interpreted as being at the expense of the Arabs and the Palestinians. China is keeping a degree of neutrality in the Israeli-Palestinian conflict, but in UN institutions, it votes on the Arab and Islamic side against Israel, also because of significant economic interests. China has taken more initiative and has been more involved in the matter in recent years for reasons of international prestige. In August 2017, China urged the international community to support a proposal it formulated for terminating the conflict and establishing a Palestinian state. Chinese Ambassador to the UN Liu Jieyi stated at the time that China’s future diplomatic efforts would focus on an attempt to achieve progress towards a Chinese solution to the Israeli-Palestinian conflict.

However, despite the difficulty and differing interests on a number of issues, relations between China and Israel are still important to both countries. Israel wants to strengthen its economic cooperation with China, especial in technology, in which Israel has a relative advantage. The Chinese economy is now the world’s largest, with 10% of direct foreign investment in the world coming from China. Trade between the two countries totaled $9.8 billion in 2017, over 6% more than in 2016. Israel has a significant interest in attracting some of the Chinese investments and acquisitions, together with increasing Israeli exports to China’s huge economy. Israel wants China to regard it as an important station in the Belt and Road Initiative (BRI) outlined by Xi. Israel also hopes to sign economic agreements aimed at increasing activity by Israeli companies in China, and, among other things, is also relying on manpower from China in order to develop infrastructure projects, due to the limited capability and experience of the Israeli labor force.

 

For its part, China is interested in increasing its global influence, and is therefor also active in the Middle East. It is demonstrating its power mainly through joint infrastructure projects in various countries, including Israel. While China possesses enormous manufacturing and economic power, Israel has know-how and quality in technology, research and development, agriculture, environmentally-friendly construction, the environment, water, development of advanced medical equipment, and digitalized medical services.

Furthermore, China wants Israel to help it in higher education and R&D. An Israeli university named the Guangdong Technion Israel Institute of Technology was inaugurated in Shantou in the Chinese province of Guangdong in December 2017 – a cooperative effort between Israel and the Chinese Ministry of Education, as part of large-scale educational reform conducted by China. Israel is the second country after Russia to establish a foreign university in China.

Together with the desire to attract Chinese investments, Israel is concerned that the Chinese government, through ostensibly private Chinese companies, will take over major companies in the Israeli economy, especially in critical national infrastructure. In 2014, Chinese company SIPG won a tender for expanding Haifa Port, which it is also due to operate for 25 years. Another Chinese company won a tender to build a new port in Ashdod. In a discussion in the Knesset Foreign Affairs and Defense Committee in July 2018, the prime minister instructed Avi Simhon, his economic advisor, and Meir Ben-Shabbat, director of the Israel National Council, to devise a mechanism for overseeing Chinese investments in Israel.

There is also concern about Chinese espionage, copying information, trade in dual-use technologies (civilian technologies that can also be used for semi-military purposes), and cyber activity via smartphones made by Chinese companies. This mode of action was revealed last month, when it was reported that a Chinese spy microchip had been embedded on servers of giant technology companies such as Amazon and Apple. As a leading global cyber power, however, Israel is well aware of the dangers in this area, mainly from the Chinese, and is taking precautionary measures. Subject to an absolute ban on the transfer of military or dual-use equipment, Israel should continue fostering good ties with Beijing, while at the same time making increasing efforts to find new markets, mainly for defense exports, with countries that feel threatened by China’s growing power. In the future, this delicate balance will be a key element in Israel’s foreign and defense policy.


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


photo: By Idont [CC BY-SA 3.0 ], from Wikimedia Commons

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