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After years of blooming trade, some see Israel-China relationship start to sour

Data presented at launch of Israel-China Policy Center shows bilateral economic activity has fallen since 2019, when Israel began scrutinizing deals with Beijing under US pressure

Workers roll up a red carpet after a welcome ceremony held by Chinese Premier Li Keqiang for Prime Minister Benjamin Netanyahu at the Great Hall of the People in Beijing, China, Wednesday, May 8, 2013. (AP/Alexander F. Yuan)
Workers roll up a red carpet after a welcome ceremony held by Chinese Premier Li Keqiang for Prime Minister Benjamin Netanyahu at the Great Hall of the People in Beijing, China, Wednesday, May 8, 2013. (AP/Alexander F. Yuan)

As US House Speaker Nancy Pelosi made her way to East Asia this week for a trip that could drastically change the US-China relationship, an event in Israel was taking place that carried the acknowledgment that Jerusalem’s own relationship with Beijing was already shifting.

“The honeymoon in relations between Israel and China is over,” former general Assaf Orion said at the launch of the Israel-China Policy Center in Tel Aviv Monday. “A series of indicators show that we are in a new period in relations between the countries and ties are now more complex and freighted than before.”

The new center will be run under the auspices of the Institute for National Security Studies, a Tel Aviv think tank with close ties to Israel’s military and government. Chinese Ambassador to Israel Cai Run attended the Monday opening, along with Intelligence Minister Elazar Stern and senior Israeli diplomats, as well as envoys from India, Vietnam and other countries.

In January, Israel’s Foreign Ministry celebrated 30 years of diplomatic ties with China by touting the $18 billion trade relationship between the countries.

According to Orion, though, both Chinese investments in Israel and Israeli exports to China peaked in 2018.

Researcher Assaf Orion speaking at the launch of the Israel-China Policy Center at the INSS think tank in Tel Aviv on August 2, 2022. (Tal Schneider/Times of Israel)

Since then, both indices have been on the decline and in the last six years, the number of Israeli firms exporting to China has dropped by 15 percent to 480 companies.

The timeline dovetails with mounting pressure on Israel, first from former US president Donald Trump’s administration and later from Joe Biden’s White House, to more closely monitor the trade relationship, especially regarding large potentially sensitive deals.

In 2019, Israel’s security cabinet announced the formation of an advisory panel on foreign investments in the country, after dragging its feet on the issue for several years while trying to balance its ties with Washington and Beijing.

Chinese workers attend the opening ceremony of the construction works for the new Tel Aviv Light Rail on February 19, 2017. (Flash90)

While the panel was too late to have any say on infrastructure projects already underway, such as the Tel Aviv Light Rail and work at Haifa’s port, it managed to stall other deals being worked on, and has helped cool down the trade relationship.

At the event, Cai noted that the economic relationship remains strong, saying bilateral trade had shot up from $15 million in 1992 to $22.8 billion in 2021. (It was unclear why Israel’s figures were $4.8 billion lower).

“China has become the largest trade partner in Asia and the second largest in the world,” the ambassador said. “Before the outbreak of the COVID-19 pandemic direct flights were open between Tel Aviv and five Chinese cities.”

China remains Israel’s largest trading partner in Asia; Israel imports more from China than anywhere else and exports more to China than any other Asian country. From 2011 to 2021, the share of Israeli exports to Asia going to China rose from 25% to 42%.

Chinese Ambassador Cai Run speaking at the launch of the Israel-China Policy Center at the INSS think tank in Tel Aviv on August 2, 2022. (Tal Schneider/Times of Israel)

Israelis appear split down the middle regarding how they see China, which has been criticized for its stifling authoritarianism and alleged crimes against humanity against the Muslim Uyghur minority in the country’s west.

According to the results of a Pew survey released in June, 48% hold favorable views of China, more than in any other Western country surveyed, while 46% were down on Beijing. Israelis showed the least concern globally about human rights issues in China or Beijing’s growing military might, though they were slightly more jittery about economic competition with China or Chinese meddling in domestic affairs.

Orion, however, noted that in other years, favorable views of China had been even higher. In 2019, 66% held favorable opinions of China and only 25% were unfavorable, according to Pew.

Then-president Shimon Peres seen during a visit to the Weibo company headquarters in Beijing, China, on April 9, 2014, where he launched his official Weibo page. (Amos Ben Gershom/GPO/Flash90)

Orion led strategy in the Israel Defense Force General Staff’s Planning Directorate before leaving the military in 2015 after 32 years. Since then he has been working as a researcher at INSS, heading up its China program.

The institute is seen as very close to the defense and foreign affairs branches of Israel’s government. Many of its researchers are former defense brass or senior diplomats and its position papers are regularly circulated among senior officials in the Defense Ministry, Foreign Ministry and National Security Council. The launch of the center was seen as reflective of the seriousness Israel is taking its China strategy as the relationship morphs.

Despite Orion’s bleak forecast, Stern expressed hopes that the relationship would burgeon anew.

“We hope Orion is wrong in his assessments of the downward trend,” the intelligence minister said. “Of course, Orion as a researcher cannot ignore data-based trends, so we look at it as a challenge, to change the situation and bring it back to where we were.”

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