Sun, Feb 03, 2019 - Page 7 News List

Trump’s freeze on China exposes Israeli tech firms to a chill

As Chinese investment in Israel surges amid US trade tensions, Beijing warns against interference from any ‘third party’

By Gwen Ackerman and Ivan Levingston  /  Bloomberg

Igal Rotem’s fastest-growing market is China, while most of the investors in his online banking service are in the US. That puts the Israeli executive at the crux of a geopolitical power play beyond his control.

Israel’s technology industry has traditionally depended on US investors and the US market, but it is bracing for possible fallout from US President Donald Trump’s showdown with China.

For Rotem and the CEOs of Israeli companies like his, the risk is that they end up on the wrong end of US efforts to curb technology sales to China, especially innovation that might give Beijing an edge over Washington.

“I’m concerned,” said Rotem, whose start-up Credorax enables global payment service providers like China’s WeChat Pay to enter the lucrative European e-commerce market. “We need to position ourselves as a pure tech company that is not taking any political position.”

Technology investment from China grew threefold in the first three quarters of last year, as increased scrutiny spurred Chinese investors and companies to shift attention to Israel from the US. That is potentially awkward for Israeli Prime Minister Benjamin Netanyahu, for whom any rift with the US over China could be embarrassing as he fights elections in April.

As recently as October last year, Netanyahu hailed “a natural partnership” with China as he hosted Chinese Vice President Wang Qishan (王岐山) at a meeting of the Israel-China Joint Committee on Innovation Cooperation.

Citing the “very powerful” combination of Israeli technology and innovation with China’s “industry, expertise, innovation and markets,” he added: “We want to expand it for the benefit of both our peoples.”

Growing pressure from the US might put those plans on hold.

During a visit to Israel last month, US National Security Adviser John Bolton was due to raise concerns about China technology penetration, in particular through Huawei Technologies and ZTE, as well as Chinese investment in the port of Haifa that has hosted the US Sixth Fleet.

US Deputy Secretary of Energy Dan Brouillette separately raised the prospect of Israel creating a body similar to the Committee on Foreign Investment in the US to better scrutinize China investment.

The flurry of US interventions in Israel has drawn a rebuke from China, and adds to tensions spurred by Trump’s trade conflict and the standoff over Huawei.

“Israel is just one of many moves the US government is taking to pressure its allies not to use China’s technology over concerns for national security,” said Wang Dong (王棟), an international relations professor at Peking University and secretary-general of the Pangoal Institution, a Beijing-based research group.

“China and Israel have very good bilateral relations and I don’t think that should be politicized,” he added.

Yet, even before the recent US visits, Israeli officials were expressing concern over the lack of oversight on foreign investment outside defense or security deals.

Massive Chinese investment could pose a danger to national security, the Times of Israel on Jan. 10 quoted security service Shin Bet head Nadav Argaman as saying.

Opposition Labor Party legislator Omer Barlev authored a bill to ensure stricter monitoring of foreign direct investment.

The move is not specifically directed at China, but Barlev said that once in control of Haifa’s port, China could decide to close it in wartime without asking Israel.

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