Facing mounting pressure from the United States over growing Chinese investments in Israeli companies, particularly in technology firms, Israel’s security cabinet announced Wednesday the formation of a new advisory panel on foreign investments in the country.
The panel will be led by the Finance Ministry, but include members from the National Security Council and Defense Ministry, as well as observers from the Foreign Affairs and Economy ministries and the National Economic Council.
Its function is to help regulators to incorporate national security considerations in the process of approving foreign investments in the finance, communications, infrastructure, transportation and energy sectors, according to a statement from the Prime Minister’s Office.
Government regulators examining new investments in Israeli companies will be able to “voluntarily” turn to the new committee as a streamlined way to consult with all relevant defense, economic and diplomatic bodies on an investment that raises concern.
Business ventures that do not require government approval will not be subject to its scrutiny.
The committee will be established within 45 days and regulators will be able to contact the committee from the start of 2020. The cabinet will convene in six months to review the body’s work and make adjustments if necessary.
The US, Canada, the UK, Germany, Australia and other countries employ similar oversight processes.
The review process will balance business and economic interests and national security considerations, the statement said.
The statement does not mention any foreign countries.
The US and China have been locked in an ongoing trade war and a contest for global influence, with Washington and other Western governments accusing the Chinese government of using its commercial ties for espionage and intellectual property theft on a mass scale. A 2018 national security strategy produced by US defense agencies pointed to China as America’s main developing strategic challenger on the world stage.
Israel has long been interested in improving ties with China, especially commercial ties, and has faced criticism from US officials for what Washington sees as insufficient safeguards to ensure burgeoning economic ties don’t leave Israel vulnerable to Chinese influence and cyber threats.
In August the Foreign Ministry reportedly warned the security cabinet that Israel was headed toward a confrontation with US President Donald Trump’s administration unless tight restrictions were imposed on Chinese investments in the country.
The report described the matter as the chief cause of friction between the Trump administration and Prime Minister Benjamin Netanyahu’s government in the last two years. It quoted senior Israeli officials as saying the Americans have in recent months expressed irritation due to perceived foot-dragging by Netanyahu.
In March, Trump reportedly warned Netanyahu that if Israel did not curb its ties with China, its security relationship with the United States could suffer.
Similar messages have reportedly been relayed in recent months by top Trump administration officials, including Secretary of State Mike Pompeo and then-National Security Adviser John Bolton.
Pompeo in March told Israel’s Channel 13 that dealing with China posed risks because it uses “debt as a trap” and “engages in spying through its commercial state-owned enterprises and presents risk through its technology systems, companies like Huawei,” adding that these “present real risks to the people of Israel.”
In June Chinese telecom giant Huawei said it was entering the Israeli solar power market to sell inverters, which help to convert solar power into energy for the electricity grid.
Dan Brouillette, of the US Department of Energy, who was in Tel Aviv around the time of Huawei’s announcement, warned that “the data that is collected off of those solar panels could be used to determine other things… we would just urge caution.”
Washington has also expressed security concerns about a proposal to let China run the Haifa Port. The US Navy’s 6th Fleet often docks at Haifa and is a major economic boost to the city.
Amid these tensions with the US, China and Israel have stepped up business ties in recent in years and launched free-trade talks.
In October 2018, Netanyahu and China’s Vice President Wang Qishan co-hosted a high-profile trade and innovation conference in Jerusalem.
In 2013 and again in 2017, Netanyahu visited China, partly to discuss fostering business ties.
Chinese firms have made major inroads in Israel, including the takeover of local food giant Tnuva in 2014, and deals to manage the key Haifa and Ashdod ports.
In 2018, bilateral trade between the countries hit a record $15.3 billion, up from just $51.5 million in 1992, and $13.1 billion in 2017, according to Ofer Peleg, head of the Israeli Finance Ministry’s mission in China — one of three such offices around the world.
There are no numbers tracking the exact size of Chinese investment in Israel, but experts say it is growing as well, as Beijing extends its global reach and looks to harness many of the technologies that have earned Israel a reputation as a world leader.
In January, the head of Israel’s Shin Bet security agency, Nadav Argaman, was said to raise concerns over China’s involvement in the country’s national infrastructure.
“Chinese influence in Israel is particularly dangerous in terms of strategic infrastructure and investments in larger companies,” Argaman said at a closed-door speech at Tel Aviv University.