The Trump administration has shown unwavering support for the Israeli government, except for one major criticism: China’s growing influence in the Israeli economy.
Chinese companies have invested in strategic Israeli infrastructure, from shipping to electricity to public transportation, and they have bought up millions of dollars in stakes in cutting-edge technology startups.
Where Israel sees an opportunity to access the world’s second-largest economy, the United States sees security threats posed by its main adversary.
“For us in the United States, the long-term threat from China is the greatest national security threat we face,” U.S. Undersecretary of Defense for Policy John Rood told a security conferencein Herzliya, Israel, this summer. “China has tremendous ambitions and President-for-life Xi ambitions to be a global power and, over time, replace the U.S. as the preeminent global power.”
Some Israeli startups now have begun shying away from attractive Chinese investment offers, afraid that the U.S. could retaliate by barring them from operating in America down the line if they have any Chinese involvement.
Tensions surround reported U.S. demands that Israel restrict Chinese investments in Israeli infrastructure and technology. President Trump warned Israeli Prime Minister Benjamin Netanyahu in March that U.S.-Israeli defense and intelligence cooperation could be harmed if Israel does not act, the news website Axios reported.
“If certain systems go in certain places then America’s efforts to work alongside you will be more difficult, and in some places we won’t be able to do so,” Secretary of State Mike Pompeo said in an interview with Israeli television. “Intelligence sharing might have to be reduced, co-location of security facilities might have to be reduced, we want to make that sure countries understand this and know the risks.”
Israeli national security officials are working to form an oversight body, modeled after the Committee on Foreign Investment in the United States, to screen deals for risks. “A committee on foreign investment in Israel should be viewed as an essential means to protect Israel’s critical national assets from outside influence and possible damage, and nothing else,” Jacob Nagel, Israel’s former national security adviser, wrote in March.
The U.S. has tightened restrictions on Chinese investments in sensitive U.S. technologies, like quantum computingand artificial intelligence, and it has been urging allies to do the same. U.S. officials accuse Israel of dragging its feet, according to Axios.
“In our view, foreign investment in Israel — like foreign investment in the United States — should take place within the confines of strong regulatory structures that ensure all companies investing in Israel do so in a responsible manner, consistent with international practices,” State Department spokeswoman Morgan Ortagus told NPR. “Foreign investment should benefit the people of Israel, not undermine Israeli national security.”
In recent years, Israel and China have held talks for a bilateral free-trade agreement. Following a round of negotiations in January in Jerusalem, the Chinese Ministry of Commerce said, “Israel is an important partner in the Middle East and along the Belt and Road,” referring to China’s plan to invest in land and sea trade routes across several continents.
China is Israel’s largest trading partner in Asia and its third-largest worldwide, after the European Union and the U.S., according to the governmental Israeli Export Institute. Chinese investments and construction in Israel reached $12.19 billion between 2005 and 2019, according to the American Enterprise Institute. Last year, exports of electronic components from Israel to China increased by 80%, the Israeli Export Institute says.
“Israel and the U.S. have different threat perceptions with China,” said Assaf Orion, a retired Israeli army general who directs the China program at the Institute for National Security Studies, an independent Israeli research institute. “Israel is way tuned against its traditional enemies, and China is not one of our enemies.”