Officials warn of risks in warming business ties with China

With Beijing’s VP set to visit, observers tell Economist that Israel would be wise to regard attention from the Asian giant with caution

Chinese President Xi Jinping, right, shakes hands with Wang Qishan after Wang was elected vice-president during a plenary session of China's National People's Congress (NPC) in Beijing, March 17, 2018. (AP Photo/Mark Schiefelbein)
Chinese President Xi Jinping, right, shakes hands with Wang Qishan after Wang was elected vice-president during a plenary session of China's National People's Congress (NPC) in Beijing, March 17, 2018. (AP Photo/Mark Schiefelbein)

Ahead of a state visit to Israel next week by a senior Chinese official – the most high-ranking to visit the country in years – Israeli defense officials have flagged burgeoning trade with the Asian giant as a possible security risk.

According to a report by The Economist, officials in Israel are concerned on two fronts: the participation of Chinese companies in massive infrastructure projects, and the sale of Israeli technology to Beijing.

Officials quoted in the report warned that some infrastructure projects could introduce the possibility of China spying on some of Israel’s most sensitive assets. The report noted that a Chinese company, Shanghai International Port Group, has been building a new commercial shipping facility in Haifa, Israel’s busiest port, where the country’s fleet of submarines, believed to possess nuclear capability, docks.

The report cited one unnamed Israeli minister as saying that it was “astonishing” that neither the cabinet nor the National Security Council had had any input on the deal with Shanghai International Port Group.

Prime Minister Benjamin Netanyahu aboard the new submarine ‘Rahav’ at the Israeli navy base in Haifa, on January 12, 2016. (Kobi Gideon/GPO)

While Israel cut off weapons sales to Beijing in 2005 amid protests from the United States, the report said officials are concerned about “dual-use” products being sold to China, such as artificial intelligence and cyber-tech, which can be used for policing and military purposes such as intelligence gathering and surveillance.

The report quoted Israeli businessmen as saying the Chinese are eager to obtain such dual-use products, and that although there is some regulation in place, there are many loopholes.

“Israel has to do business with China, of course, but there is no serious mechanism to make sure that we don’t sell off key economic assets and valuable technological knowledge,” Efraim Halevy, a former head of the Mossad, was quoted as saying.

Israeli exports to China increased dramatically, by 62 percent, in the first eight months of 2018 compared to last year — from $2.14 billion in 2017 to $3.5 billion — according to Israel’s Central Bureau of Statistics. Imports from China increased by 10%, from $4.45 billion last year to $4.9 billion in 2018.

Before that, China, the world’s most populous country and second-largest economy, was still regarded as a “relatively minor player” in the Israeli economy, focusing almost exclusively on strategic investments and making up at most 5% of the total activity in Israel, a report by IVC Research Center said in February.

Prime Minister Benjamin Netanyahu, who last year met Chinese President Xi Jinping in Beijing and is keen on further building up the commercial ties, has reportedly been less than eager to create a government agency that would provide more rigorous oversight of trade.

China’s vice president will participate in an “innovation” event in Israel this month, making him the highest-ranked Chinese official to visit the Jewish state in more than a decade.

Wang Qishan will head a Chinese delegation to the fourth installation of the Israeli Innovation Summit, organized by the Prime Minister’s Office, on October 24-25. Netanyahu will attend both days of the event.

Prime Minister Benjamin Netanyahu (R) shakes hands with Alibaba founder Jack Ma on May 2, 2018. (Haim Tzach/GPO)

Qishan, considered a close ally of President Xi, is in charge of financial issues and is a dominant figure in Beijing’s diplomatic relations, particularly with the US.

He will land in Israel on October 22 and will head the delegation in discussions meant to expand business and trade opportunities and cooperation between Jerusalem and Beijing.

Qishan will be the guest of honor in a gala event scheduled for October 24 and in the grand opening of a new innovation center at the Peres Center for Peace and Innovation a day later.

Also attending the conference will be Jack Ma, the billionaire founder and CEO of retail giant Alibaba, who will be one of the keynote speakers at the conference, according to the reports.

It will be Ma’s second visit to Israel in six months, after a busy tour in May, during which he explored business opportunities in the country, visited the offices of several local startups and met Netanyahu in Jerusalem.

At the time, the Chinese business magnate, investor, and philanthropist noted that Israel was a much more peaceful country than he expected, with a strong economy and security. Netanyahu invited him to invest in Israel, saying “there are amazing opportunities here.”

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