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October 14, 2014 4:23 pm

China Investment in Israel Said Surpassing U.S., But Some Worry About Strategic Interests

avatar by Dave Bender

China Israel flags. Image: Israel Ministry of Foreign Affairs

China Israel flags. Image: Israel Ministry of Foreign Affairs.

In a weekend interview, noted French investment banker Eddie Cukierman told Israel’s Ma’ariv newspaper, “In the last two years, the Chinese have surpassed the Americans in investments in Israel.”

While not backed by hard statistics, his assessment seems to be not far from reality.

Huge deals like ChenChina’s 60 percent investment in Makhteshim-Agan Dead Sea chemicals in 2011, the not-quite-final deal to purchase national icon Tnuva dairies, the attempt to acquire control of insurance giant, Clal, Chinese involvement in major national infrastructure projects, all suggest growing interest of Chinese companies in Israel and a bevy of major business opportunities associated with them.

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Cukierman moved to Israel from France in the early 90’s and established a small bank in Europe engaged in raising capital. As a banking family (his father was director of the Rothschild family businesses), he focused on raising capital via Cukierman European for private investments in Israeli companies. Among other projects, he also tried to promote offerings of Israeli companies on the French stock exchange.

But the European financial community’s interest in the Israeli market was limited.

“The money that comes here from France, is almost entirely from French Jews,” he said, “I have a broad familiarity with the business community there, and now, because of anti-Semitism in France and Europe in general, there is a growing interest, but only by the Jews.”

Two years ago, Cukierman began to recognize the new direction.

“At a conference we held in France three years ago, I met Ronnie Chan. Chan is one of the richest people in China and possibly the richest. He controls the Hong Kong real estate company Hang Lung. He told me, ‘I thought that the Israelis are smart. If this were true, they would do more business with China.’ The next day I met him again and told him he was right. I suggested we do it together.”

They announced the establishment of a fund to encourage Chinese investment in Israeli companies.

“Yair Shamir was a director and partner, until he decided to join the Israel Beiteinu party,” Cukierman said. “We met with leading investors and organized the visit of 60 Chinese billionaires to Israel.”

Chen will attend the International Investors Conference at the chic Cukierman Investment Bank in Tel Aviv on October 27, with the participation of executives and investors from Israel and abroad.

What exactly are the Chinese looking for in Israel? The feeling here, at least, is that they have excess money and buy indiscriminately.

“They want to improve the competitiveness of their industry leading technologies,” according to Cukierman.

“I met with the CEO of the largest computer company, Lenovo, which bought IBM’s home computer business. He told me that his biggest competitor, HP, has invested six billion dollars in Israel, a sign that they see Israeli technology is very important to leverage their technology, and therefore they, too, must be present here.”

However, there is strong suspicion in Israel and around the world as to Chinese investors’ overall intentions. Americans are afraid to buy their computers, for fear of viruses; in Israel, some are wondering why a Chinese government company wants to buy a local dairy.

Carmel Tunnel. Photo: Haifa Municipality

Carmel Tunnel. Photo: Haifa Municipality

“There have been allegations in the past, that may have been justified, that the Chinese acquire Western technology in order to bring it back to China,” Cukierman said. “Today [however] the Chinese think in other, global, terms. They do not think how to take technologies that others have developed. They want to gain by developing companies. They offer companies the keys to a growing Chinese market, which is a common interest of all the parties involved: an opening into the Chinese market, and thus growth.”

When asked how Israel does in the eyes of the Chinese, compared to other countries Cukierman said:

“They see a lot of potential. And we’re hungry for investment. Americans are less interested, because they have sources of their capital, and the economic situation in Europe is not encouraging. While the Chinese are also very active in investments in Africa and developing countries, these investments are of a different kind. Here they have an opportunity to invest in western technologies with international growth potential.”

“Who are the biggest investors in your fund?” Cukierman was asked.

“We’ve raised $100 million, of which $75 million was invested by China Everbright; this is the largest private equity firm in China. They also own the biggest soft drink producer in the country. This is a huge company. They will be about 30% of the fund when it reaches its full extent.”

Others, like Yoav Sade, a vice chairman of the Israel-China Chamber of Commerce, see the Chinese moves as “strategic investments and not purely financial ones,” according to the Wall Street Journal.

“Chinese investors would look for tech companies that already have a product and sales with an added value that has to do with China,” Sade suggested. “Many times the investment contracts include commercialization licenses for operations in China.”

Another positive point of view is espoused by Alexander B. Pevzner, the founding director of the Chinese Media Center at the  School of Media Studies, at the College of Management – Academic Studies, in Rishon Letzion.

“Israel-China ties are mutually beneficial, complementary, and a true win-win relationship,” Pevzner told The Algemeiner on Monday.

“At a time of geo-strategic and economic changes, Israel needs new markets, while at the same time offering its technological innovation to China. For example, Israel excels in agriculture, communications, medical devices, and other high-tech areas. China is in the midst of the biggest transformation in modern history and needs what Israel has to offer for its growing middle class.

“The Chinese are long-term investors and I believe that the two sides have barely scratched the surface of the potential for cooperation,” the veteran analyst on Israel-China relations holds. “Therefore, I expect bilateral economic and commercial cooperation to increase and deepen rapidly in the future.

“What’s more, the growing exchanges between Israel and China are not, and should not, be limited to commerce,” Pevzner averred. “Ties are also growing in areas such as culture and education. That is why we have established the Chinese Media Center at the College of Management – Academic Studies, Rishon LeZion – a Center that would serve as a media bridge between Israel and China and contribute to the bilateral relationship, as well as training the future generation of media and communications leaders.”

But other voices, both in the political as well as security echelon, take a far less rosy view of the dragon’s cozy approach.

Knesset member and former Labor Party chief Shelly Yachimovich, recently slammed the sale of majority shares in Tnuva, Israel’s dairy giant, to China.

“What normal country puts its food security and its entire milk industry in the hands of China?” she asked in the Knesset, the Free Beacon noted.

As well, former Mossad chief Ephraim Halevy voiced strong objections to the recently approved massive railroad project reaching from the center of the country to Eilat on the Red Sea, a program strongly backed by Prime Minister Benjamin Netanyahu.

According to Halevy, such a plan would “bring Chinese control over a main strategic transportation artery in Israel,” and possibly threaten relations with the United States.

The NIS 100 billion, five-year push to revamp the country’s transport infrastructure will lay  180-kilometers (112-miles) of track from Nahal Tzin in the central Negev Desert to the Red Sea port and tourist center.

In 2010, the Chinese built and completed, and in record time, a vehicular traffic tunnel in Haifa beneath Mt. Carmel.

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