Israeli Security Officials Warn Against Over-Investment by China

China ramps up investments in 'Start-up Nation,' leading to security concerns

JERUSALEM—As China significantly steps up its investments in Israel and in joint research programs, some prominent Israelis are warning against too close an embrace.

The former head of the Mossad, Ephraim Halevy, has called on the Knesset to devise ways of protecting Israel’s major assets from overexposure to China.

The former head of the Labor Party opposition, Knesset member Shelly Yachimovich, objected last week to the recent sale to China of a majority share in Tnuva, Israel’s largest manufacturer of dairy products.

"What normal country puts its food security and its entire milk industry in the hands of China?" she asked in the Knesset.

Despite such warnings, cooperation is moving ahead at warp speed as Israeli industrialists eye China's market. The significant increase in Chinese investment in Israel in recent years has alerted Israel’s internal security service, the Shin Bet, to the possibility of commercial espionage, according to Reuters. The agency last year advertised for fluent Chinese speakers to serve in the Tel Aviv area.

Officials in Israel’s Economic Ministry termed such attitudes exaggerated.

"One of the reasons I assume people have concerns is that it’s the unknown," said Ohad Cohen, head of the ministry’s foreign trade department. "China is still a riddle to many people."

Halevy's objections, however, are not based on ignorance of China. The former Mossad chief objected to proposals, backed by Prime Minister Netanyahu, to permit China to build a railroad to Eilat, Israel's southernmost port, and to build new port facilities there.

It would, he said, "bring Chinese control over a main strategic transportation artery in Israel." It could also harm Israel's relations with the United States by augmenting China's strategic status, he warned.

Some 400 Chinese businessmen and government officials spent five days in Israel last week in an intensive round of talks about possible business deals and joint ventures.

The delegation was headed by Chinese Vice Premier Liu Yandong, who inaugurated a $300 million center in Tel Aviv for joint research and education.

"We believe we have a lot to learn from Israel which is well known for its innovation," she said.

China’s investment in Israel has grown from virtually nil four years ago to more than $4 billion this year. Both Israeli President Shimon Peres and Prime Minister Benjamin Netanyahu have made state visits to China in the past year as economic relations accelerate.

The director of a Chinese-Israeli investment firm, Shangyan Fen, said in Tel Aviv last week that his country is drawn to Israel because of its status as one of the world’s leading start-up nations.

"We need to upgrade China’s industrial base and move to a high-tech economy," he said. "Israel has the technology that China needs to move ahead."

Amir Gal-Or, a partner in an Israeli-Chinese investment firm, predicted that the rate of Chinese acquisition of Israeli firms will increase by 20-30 percent annually in the coming years, with Chinese investments in Israeli firms doubling annually.