Israel-China Relations in an Era of Strategic Rivalry and Great Power Competition

This study analyzes Chinese-Israeli technological innovation exchanges, major infrastructure projects, and cooperation under the Belt and Road Initiative (BRI) framework in the era of great power competition. It explores how this competition and strategic rivalry impacted Sino-Israeli bilateral ties from 2013 to 2021. Israel’s unique geographical position, well-secured human capital, start-up nation reputation and hi-tech foundation, political stability, and stable business environment have made Israel attractive to the BRI framework. However, the intensifying rivalry between the United States and China pressures Israel to side with one of the two powers, which in turn may result in its losing either the security partnership with the US or the economic and technological partnership with China. The Israeli government must manage its relations with Washington while boosting the bilateral ties with China, especially in infrastructure projects and technological innovation. Hence, Jerusalem must continue, with requisite caution and minimum concessions, to expand its cooperation with China under the BRI while recognizing Washington’s serious concerns.

Introduction

A new era of great power competition has returned to the center of the global stage (Wu, 2020). United States-China rivalry involves full-scale, full-spectrum, great power strategic competition for wealth, power, and influence, both within East Asia and globally. It features competing ideals and models for political governance and economic development, along with competing views on the structure and rules of the world order, all rooted in competing interests. Each side is determined to maximize its global position and freedom of action relative to the other (Lippert & Perthes, 2020).Yet while the People’s Republic of China (PRC) has not matched the US across the full spectrum of power assets and capabilities, it is rising quickly. Moreover, China does not have to equal Washington’s power and influence to become a significant competitor (Zhao, 2022).

Over the last decade, the PRC’s presence and influence in the Middle East have expanded significantly. The region has emerged as China’s most strategically important region beyond its immediate neighborhood (Scobell et al., 2021), and has become increasingly critical for Beijing’s commercial interests and its quest for worldwide influence. Beijing’s need for energy underlies its interest in the Middle East, and with its high volume of oil imports, the PRC is the largest trading partner of many countries in the Middle East (Wu, 2021). For their part, many regional states have embraced the PRC’s offerings to diversify their great power relationships.

The significance of the Middle East for the PRC and the importance of Beijing for the region have increased dramatically since the Belt and Road Initiative (BRI) was officially launched in 2013. Beijing has signed contracts and partnership agreements with Middle East countries, with contracts on infrastructure, energy, finance, and technology cooperation, and softer initiatives such as cultural exchanges and tourism (Chaziza, 2020). As the PRC’s current flagship project, the BRI in many ways positions the Middle East as hub, be it as a center that the framework must traverse, a substantive economic and diplomatic partner, a major source for its energy security, or geopolitical ground for advancing international agendas.

Relations between Israel and China have warmed in recent years and evolved rapidly in diverse areas, including diplomacy, trade, investment, construction, educational partnerships, scientific cooperation, and tourism.

The PRC’s presence in the region is related primarily to economic imperatives, i.e., the drive to secure its energy supply and synergize its BRI framework with local development projects. The BRI comprises a framework of economic and commercial interests between the PRC and many geographical regions. It targets new markets and aims to guarantee Beijing’s energy security for economic growth and domestic stability. The initiative seeks cross-continental connectivity and integration between China and Europe (Wang, 2016). The Middle East, a vital geostrategic global crossroads, thus became a crucial part of the BRI, especially its Maritime Silk Road Initiative (MSRI) component, as many of the various straits, sea routes, and hubs and offshoots run through the region (Scobell & Nader, 2016).

Relations between Israel and China have warmed in recent years and evolved rapidly in diverse areas, including diplomacy, trade, investment, construction, educational partnerships, scientific cooperation, and tourism. Beijing’s prime interest in Israel is advanced technology, and it sees Israel as a global powerhouse in technology and innovation in cybersecurity, bio-agriculture, and green technology. Geopolitically, Jerusalem’s ties and putative influence (potential bridge) in the US and Europe have encouraged China to cultivate a closer relationship with Israel, hoping that this link would somehow help improve Beijing’s standing in the world. Within the broader context, particularly as part of the BRI, Israel’s geographical location is another potential node in the BRI scheme (Zhu, 2019). For Jerusalem, Beijing’s attraction lies in its vast, rapidly expanding economy that presents countless opportunities for the Israeli economy. Israel seeks to expand its economic and diplomatic ties with the PRC, the world’s fastest-growing major economy, and diversify its export markets and investments from the US and Europe (Efron et al., 2019).

Overall, Sino-Israeli ties have developed smoothly, without bilateral historical baggage or direct conflicts of interest (in the past, relations were damaged due to restrictions on the Phalcon and Harpy UAV defense exports). Indeed, the ties are always influenced by a third party, namely, the US, which is watching, not necessarily with jealousy but with serious concern, mixed at times with anger. This is due to Jerusalem’s frequent disregard for Washington’s discomfort as Beijing makes inroads, figuratively and deep into areas of America’s vital interests in the Middle East (Sela & Friedman, 2019).

In this context, the study below analyzes how the great power competition and strategic rivalry, which build on historic and contemporary insights, impact Sino-Israeli bilateral ties. It argues that Israel is not prepared to jeopardize its indispensable cooperation with Washington because of Beijing. Like other countries globally, Israel, a small but close ally of Washington, looks at the dynamics of great power competition to chart its course. Situated at the center of the Middle East, Israel finds itself in a delicate strategic position. It seeks to expand relations with the PRC, promote innovation cooperation and infrastructure projects, attract capital, export technology, and tap into the vast and growing Chinese market. Yet it views its ties with Washington as a unique and special relationship and a core pillar of its national security and economy. Israel is determined to maintain its security partnership with the US, while strengthening its economic and technological partnership with China.

At the same time, the intensifying great power rivalry imposes pressure on Jerusalem to side with one of the two powers. As a result, Israel could lose either the security partnership with the US or the economic and technological partnership with Beijing. Against this background, Israel is required to wield sharp diplomatic and political skills to manage its relations with China and the US simultaneously. Israel does not have to give up one of the two; it can actively propose the golden mean of “both and both.”

The Belt and Road Vision

The BRI is unquestionably one of China’s most significant undertakings this century. Comprising a framework of commercial and trade ties between the PRC and many geographical regions, it involves massive economic and diplomatic initiatives. The government of Xi Jinping and the Chinese Communist Party (CCP) regard the BRI as the centerpiece of the PRC’s foreign policy, and in 2017 it was formally incorporated into the Chinese constitution to signal the initiative’s centrality to Beijing’s sense of its global destiny. It targets new markets abroad and guarantees China’s energy security to sustain its economic growth and promote domestic stability. In addition, the BRI seeks to enhance cross-continental connectivity and integration between Beijing and European countries (Watanabe, 2019; Clarke, 2017).

The initiative includes the MSRI, a maritime element, and a land-based equivalent, the Silk Road Economic Belt (SREB). The SREB comprises various sub-divisions (including roads, railways, and pipelines), and the MSRI (consisting of seaports and coastal development) looks to create an economic corridor that links China with Europe and Africa through the Middle East. The aim is to ease trade and improve the PRC’s access to new markets and energy sources (Blanchard, 2020; Evron, 2019). The BRI’s scope has also grown, becoming a broader and more amorphous undertaking, with Beijing adding a Digital Silk Road, Health Silk Road, and Green Belt and Road, all of which are not bound geographically (Hillman & Sacks, 2021).

The BRI’s geographic range is expanding steadily, covering 140 countries (although not every country has formally committed to host BRI projects) and 29 international organizations along six economic corridors, with an estimated $8 trillion investment (Nedopil, 2021). The BRI framework involves two-thirds of the world’s population, 40 percent of the global gross national product, and an estimated 75 percent of known energy reserves (Rolland, 2019). Thus, this ambitious project demands harnessing significant human, technological, political, and financial resources worldwide to realize the BRI vision (Lokhande, 2017).

Israeli Cooperation with the BRI Framework

In 2015, China’s National Development and Reform Commission delivered and unveiled the “Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st Century Maritime Silk Road.” The vision spelled out five types of “connectivity”: enhancement of trade, connectivity, financial integration, political coordination, and people-to-people bond (“Vision and Actions,” 2015).

Under the BRI framework, the Chinese government emphasizes in its diplomacy the definition of ties with core countries, thus serving as a guideline for the professional echelons to prioritize collaboration with Jerusalem on technological innovation. In March 2017, during Prime Minister Benjamin Netanyahu’s official visit to Beijing, President Xi Jinping announced an Innovative Comprehensive Partnership with Israel (Chaziza, 2018), a designation of the relationship that signaled the national interest of the two countries (as an economic and technological—not strategic—partner). As President Xi said in a November 2021 phone conversation with Israeli President Isaac Herzog, “Innovation has become a highlight and booster of bilateral relations” (Xinhua, 2021).

As a result, various joint mechanisms for cooperation began to appear (such as conferences, joint committees, fairs) supporting this designation. For example, the Israel-China Joint Committee on Innovation meeting, the most important inter-governmental mechanism (G2G) with China, promotes dialogue and cooperation between government ministries, emphasizing innovation. These collaborations and meetings began in 2014 and are an important channel of direct dialogue with China at the highest leadership levels. This mechanism helps lower bureaucratic barriers, increase exports, and promote other issues critical to Israel’s economy, such as the Free Trade Area Agreement, flights, and tourism. Israel is also one of 57 founding members of the Asian Infrastructure Investment Bank, which serves as a financial tool to promote the BRI (Xiao, 2016).

The BRI’s geographic range is expanding steadily, covering 140 countries and 29 international organizations along six economic corridors, with an estimated $8 trillion investment.

Although Israel’s role in the BRI framework has attracted less attention, Chinese diplomats see the country as a significant node within the BRI architecture. During Netanyahu’s last visit to China, President Xi said that the two countries would steadily advance major cooperative projects while jointly building the Silk Road Economic Belt and the 21st Century Maritime Silk Road. Prime Minister Netanyahu also mentioned the BRI in his remarks, saying, “The Israeli side is ready to actively participate in cooperation and infrastructure and other areas” within the SREB framework and the 21st century MSRI (Ministry of Foreign Affairs, the People’s Republic of China, 2017).

In December 2019, Zhai Jun, the Chinese special envoy to the Middle East, stated: “[Given that] relations and cooperation between Israel and China are strong, I am sure that under the framework of the Belt and Road Initiative China-Israel cooperation will only see greater potential. Israel and the wider Middle East are important participants of the Belt and Road Initiative. We have a lot of areas to tap, such as infrastructure and connectivity, and China is ready to advance the cooperation with Israel on that and…for me personally, I will also work hard on that” (Linn, 2019).

From the Belt and Road cooperation to technology and innovation exchanges, China-Israel relations have achieved fruitful cooperation in various fields. Multiple opportunities for innovation cooperation and infrastructure projects between China and Israel emerge regularly. This is a noticeable trend identified by analysis of the trade and investment patterns between the two countries. Considering that the China-Israel relationship is firmly grounded in innovation and other important aspects, it is expected that the cooperation with the BRI will only continue to stimulate the development of the economic relations between these two partners.

Port Development and Operations

Connectivity is crucial for integrating Israel into the BRI framework. Situated between Europe and Asia and between the Middle East and Africa, Israel’s strategic positioning for the BRI is clear. Jerusalem can be a small but essential stop on the MSRI, connecting the Indian Ocean and the Mediterranean Sea through the Gulf of Aqaba and the Suez Canal, for instance, the Peace Railway, or the Eilat-Ashdod Port rail, if implemented (Ben-Gedalyahu, 2021). Chinese companies have been increasingly involved in Israel’s seaports, railways, transportation, and other major infrastructure projects of the SREB associated with inherent economic profits (Elis, 2016). Cross-border connectivity projects are different from other BRI-associated activities, given that connectivity projects—the essence of the BRI vision—will require China to increase its regional engagement, a shift that it has so far avoided (Evron, 2019).

The PRC highlights the advantages of Israel as a hub for the BRI. Israel’s well-endowed human capital, hi-tech base, developed economy, government and business environment, and stable society make the country a precious asset for China. Jerusalem is at the nexus of PRC’s far-flung commerce routes, but its stability is the exception in the turbulent region. The geostrategic significance of Israel within the BRI is also an important factor due to its location near the Arab states as a balancing force that can lend credibility to Chinese soft power in the Middle East (Efron et al., 2019). Moreover, the massive development of energy resources in the Eastern Mediterranean, new ports on the Mediterranean shores, new trade routes between Israel and its Arab neighbors, and the growing geo-economic alignment between Israel, Greece, Egypt, and Cyprus make it a highly attractive market for the BRI (Kuo, 2018).

Aware of Israel’s advantages to the BRI, Chinese shipping companies are increasingly active in development and operational rights in a chain of ports in Israel. Under the framework of the MSRI, Beijing’s maritime activity consists mainly of constructing and operating ports and railways. Given Israel’s important geographical location, China has stepped up its presence by building, modernizing, expanding, and operating the most important ports and terminals in Israel. These current and potential future investments should be seen in China’s broader infrastructure activities under the BRI framework. The investment in sea lanes and railways complement each other, as they jointly open new trade links between China and the Eurasia-Africa zone (Chaziza, 2018b).

Chinese shipping companies gained access to Israel’s two major seaport construction projects. The first, beginning in June 2014, was construction of the Southport Terminal in Ashdod, called Hadarom Port, by Pan Mediterranean Engineering Company (PMEC), a unit of China Harbour Engineering Company; it was inaugurated in 2022. The terminal is expected to have a container-handling capability of one million standard containers and become the most important terminal in southern Israel (Shamah, 2014). Moreover, PMEC also won a tender for NIS 1 billion to upgrade Ashdod’s main dock (PortSEurope 2020). The second major construction project is the tender won by Bayport Terminal Company, a subsidiary of Shanghai International Port Group (SIPG), to operate a new terminal at the Haifa Port (which opened in 2021), with a lease for 25 years (Petersburg, 2015).

Another Chinese potential mega-transport project in Israel is the construction of the Red Sea-Mediterranean high-speed railway (Red-Med railway), which will facilitate connectivity between the Israeli ports of Eilat and Ashdod and provide a safe alternative route to the Suez Canal. Beijing has invested in building a regional network of sea infrastructure and rail lines (ensuring reliable access for Chinese trade shipping from the Red Sea to the Mediterranean) to connect China with Europe via Asia and the Middle East. The Red-Med railway will provide a safe route, complementary to the Suez Canal, by which raw materials and energy vessels could be transported from Europe to China. It would also move China’s finished products back to Europe through the Gulf of Aden (Chaziza, 2016). Nevertheless, it is not certain that Chinese companies will take part in the project or when the Red-Med railway will be constructed, and the project has yet to receive final approval and secure funding.

Investments

Israel is unique among countries for Chinese investment, as it aligns with the BRI and Chinese targets to improve its domestic hi-tech sector. This combination means that the Chinese government encourages construction and technology companies to engage in Israel. These investments in Israel advance the BRI framework and the PRC’s broader long-term objectives to increase its position and role in the region and connect to Europe (Efron, Schwindt, & Haskel, 2020). The PRC invested significant capital and resources in innovation, technology,venture capital, agriculture,infrastructure, and construction projects and acquired influential positions in major Israeli industries (Chaziza, 2018a).

Indeed, since normalizing diplomatic relations, China and Israel have seen a dramatic expansion of economic ties. According to figures from the Israeli Central Bureau of Statistics (CBS), in 2013, trade between Israel and China was worth $8.22 billion, and in 2021, the figure was almost double. Despite setbacks due to the COVID-19 pandemic and striding against the global trend, Sino-Israel bilateral trade last year increased to $15 billion: Israeli exports to Beijing grew to $4.3 billion, and imports increased to $10.7 billion (CBS, 2021).

Private companies and venture capital funds are the main investors in the hi-tech sector, some of which serve as the investment arms of giant corporations. Conversely, Chinese investments in non-hi-tech sectors come mainly from state-owned enterprises (SOEs) that focus primarily on investment in infrastructure projects. At the same time, the Chinese investments do not constitute a substantial share of foreign investments in the Israeli economy. They are relatively low compared to investments by Western companies, representing less than 10 percent of foreign capital invested in Israel (Ella, 2021).

According to the China Global Investment Tracker (2021), China’s investments and construction in Israel from 2013 to 2021 reached $13.2 billion. The key investment sectors are $4.4 billion in hi-tech, $2.9 billion in agriculture, and $4 billion in transport. Moreover, Chinese investments, especially in the hi-tech sector, did indeed show progressive growth in number and scale, especially between 2014 and their peak in 2018. Nevertheless, between 2019 and 2020, the Chinese investment shrank again. China slowed its penetration into the Israeli economy, just as it did elsewhere (Ella, 2021).

Innovation

Despite its shortage of natural resources and a challenging geopolitical environment, Israel has become a global powerhouse of science, technology, and innovation. More than a thousand Israeli companies operate in China, seeking to exploit the PRC’s technology manufacturing capacity. China, which aims to transform its economic model from one based on manufacturing to one based on innovation and a rise in the production value chain (Kuo, 2018), is interested in Jerusalem’s advanced technology and eager to learn from its success as an innovation model. Chinese companies are searching for cutting-edge technology that can complement the country’s strengths as a rising innovation nation, while Israeli companies are looking for market expansion opportunities. This investment will continue to grow, since many of the projects are under the technology and innovation exchanges or BRI cooperation that requires investment in innovation on regional and global tracks (Peled, 2017; Chaziza, 2018a; Friedfeld & Metoudi, 2015; Zhu, 2022; Shang, Lyu, & Wang, 2022).

Israel’s reputation as a start-up nation makes it particularly attractive to Chinese investment in technology. The PRC views Israel as a model for creating an innovation hub quickly, which matches Beijing’s target of developing its indigenous innovation capabilities (Efron et al., 2020). The vast majority of China’s investments and M&As in Israel were in the technology sector (worth approximately $9.138 billion). The most significant assets are in the life sciences sector (biotechnology, medical technologies, pharmaceuticals, and biochemistry), followed by investments in software development and IT companies. The PRC also invests in companies in the internet sector, chips, communications, and semiconductors. Finally, Chinese investments were made in Israeli venture capital funds and companies in the clean-tech industry (green technologies and water technologies) (Ella, 2021).

China also began to focus its investments on technology start-ups in Israel. Over the past two decades, Beijing has become a financial source for Israeli hi-tech enterprises; particularly from 2014 onward, there was a rise in Chinese investments in Israel, both in the number of deals and their value. Investment in Israeli hi-tech from 2007 to 2020 totaled $9.1 billion (Ella, 2021). These investments peaked in 2018, and then began to wane. Moreover, Israeli companies often fear that their activity with China may have them black-listed in the American market, due to US sensitivity to technological collaboration with the PRC, even if no defense-related technology is involved.

Baidu, Qihoo 360, Lenovo, Ping An, and other prominent science and technology companies invest in Israel’s science and technology funds (CTECH, 2018). However, unlike data on foreign investments in Israel in non-technological sectors, the amounts invested in the hi-tech industry are not always visible and reported, and are often integrated into the total sum of investments made by several different investors in a single round, challenging a complete and accurate picture of Chinese investments in Israeli hi-tech. Therefore, the Chinese investment in the Israeli hi-tech sector could be significantly higher than the figures documented (Ella, 2021).

The drop in the number and size of deals between the two countries indicates that Chinese companies are investing abroad cautiously. China may have cooled its investment in Israel from an understanding that there is growing US pressure to critically assess investments in Israel from Beijing, and given Israel’s decision to establish a mechanism to monitor foreign investments in its economy (Chaziza, 2019). In addition, the new government investment restrictions on taking capital out of China and increased Communist Party supervision on investments and acquisitions overseas, and a reduction in capital liquidity, limit access to possible sources of financing for investments abroad (“China Toughens,” 2017).

Chinese entities have also invested in Israeli venture capital firms (e.g., JVP, Pitango, OurCrowd, Catalyst, Canaan Partners, Viola Ventures, and Singulariteam). Many of these venture capital companies (Tnuva, ThetaRay, Kaymera, Toga Networks, HexaTier, Rainbow Medical, and Copyleaks) focus on investing in other Israeli companies innovating in areas of sensitive or potentially dual-use technology, such as artificial intelligence), cybersecurity, and robotics (Efron et al., 2019).

Agriculture and Industry

Agriculture was one of the most prominent targets of Chinese investment, at approximately $5.3 billion between 2011 and 2018. Together with technology, these two sectors accounted for roughly 87 percent of total Chinese investment in the Israeli economy (Witte, 2021). Furthermore, the agriculture-related investment included a vital technology component in that it focused on agro tech. For agriculture, the investment figure is driven by the acquisition of Adama for $2.8 billion by ChemChina (Gabison, 2016).

The PRC’s growing acquisitions and investment in key Israeli industries are one of the main pillars of the technological innovation exchanges and cooperation within the BRI framework. Over the last decade, Chinese companies have acquired several key Israeli industries (Tnuva, Makhteshim-Agan, Shahal, and Ahava). China invests billions of dollars in the Israeli market in renewable energy, water treatments, medical equipment, communications, and agriculture. These investments vary from direct investment to cooperative arrangements with Israeli venture capital firms or joint efforts to raise capital with other investors and enterprises. Many Chinese transactions aim to improve productivity, penetrate overseas markets, and improve technological capabilities or management skills (Chaziza, 2018a).

While major infrastructure projects, cutting-edge technology, and innovation have been the bedrock on which the China-Israel relationship has flourished over the past years, other sectors of its economy further define the long-term bilateral economic and political relationship. Since the establishment of the Innovative Comprehensive Partnership, economic and trade cooperation between both sides has increased. However, the principal objective of the BRI framework is to boost economic cooperation with Israel by enhancing trade, connectivity, and a people-to-people bond.

Great Power Competition: US, Israel, and China

The global US-China great power confrontation stands to change the Middle East landscape. The speed with which this rivalry intensifies and the bipartisan nature of US opposition to the PRC have created a highly precarious situation for Middle East countries. Consequently, they face a complex geopolitical and commercial calculus, with new pressures on managing their national security and economic development. The intensifying competition complicates their efforts to maintain ties with these powers in various ways and forces them to choose between keeping the security partnership with the US or strengthening their economic and technological partnership with China.

Moreover, China’s growing economic role in the Middle East through the BRI poses another significant challenge to US global interests and values. The BRI’s scale, scope, and centrality can transform the world order while the Washington-led, liberal global order experiences a paradigm shift, leading to short-term volatility and creating long-term uncertainty about the international system (“The Belt and Road Initiative,” 2019). While the Biden administration tries to shape its Middle East policy, the BRI framework could become the frontline for the unfolding great power rivalry (Blanchard, 2021).

China’s investment in Israel’s economy has grown since the announcement of the Innovative Comprehensive Partnership. China’s Ambassador to Israel Cai Run noted that “since the establishment of diplomatic ties in 1992, China and Israel have achieved fruitful cooperation in various fields, and innovative cooperation has become a highlight and booster of the China-Israel relations” (“Innovative Cooperation,” 2022). The BRI has also played one of the leading roles in promoting China-Israel relations. China’s investments and construction in Israel from 2005 to 2012 stood at $1.5 billion, while the investment from 2013 to 2021 reached $13.2 billion. As former Israeli President Reuven Rivlin said, “The Belt and Road Initiative is a vision that reflects the ability of people to connect and work together across the world, to build bridges for all peoples, and eventually a better future for all” (Shang, Lyu, & Wang, 2022).

Israel is an attractive hub of innovation for Chinese firms, and Beijing is a huge potential export market and source of investment for Israeli companies. Chinese firms’ investments include investments in the hi-tech sector that produce sensitive technologies and the construction and operation of major infrastructure. All Chinese firms investing in or building major infrastructure projects in Israel have ties with the Chinese government, military entities, or armed forces (Orion & Lavi, 2019). Any substantially sized company originating in the PRC likely has informal or formal links to the Chinese government and is expected to collaborate with its intelligence and security apparatus (Efron et al., 2019).

In addition to long-running US security concerns regarding China, Washington is particularly anxious about transfer of US defense-related technology to Beijing, along with other technologies or capabilities that could strengthen its military edge. Accordingly, investment by Chinese companies in sensitive technologies and the construction of major Israeli critical infrastructure projects have led to official US expressions of concern (Kampeas, 2020). They have raised some concerns that the PRC might acquire technologies or gather intelligence to threaten US national security in cybersecurity, satellite communications, AI, and robotics (Efron, Schwindt, & Haskel, 2020; Efron et al., 2019).

US officials have also voiced concern that Chinese construction and operation of major Israeli infrastructures could complicate US-Israel cooperation.

In the 1990s and 2000s, Sino-Israel defense industry cooperation on the Phalcon and Harpy UAV fed tensions in Washington-Jerusalem defense ties and led to an apparent de facto US veto over Israeli arms sales to the PRC (Kumaraswamy, 2012; Kumaraswamy, 2013). As long as defense relations remain limited, the main misgivings regarding Sino-Israeli ties involve investment, related intellectual property issues, non-military technology, and construction projects. Consequently, and against the background of increasing pressure from the US, the Israeli government created an advisory panel on foreign investment. However, the new advisory panel on foreign investments reportedly does not have the authority to review investments in sectors such as hi-tech, which account for the extensive PRC investments in Israel (Chaziza, 2019).

Senior officials in the Trump and Biden administrations have made notable efforts to discourage Chinese involvement in major Israeli infrastructure and communications projects. In line with similar warnings that the Trump administration communicated to other allies and partners worldwide, Jerusalem has been advised that US security assistance and cooperation could be limited if Chinese companies Huawei and ZTE establish a 5G communications network in the country. According to Reuters, under US pressure, Israeli authorities agreed to guarantee that they would use equipment only from “trusted vendors” for its next-generation 5G mobile telecoms networks (“Israel, US Near Deal,” 2020). According to a report by the Israeli media, the National Authority for Data Protection at the Israel Security Agency (Shin Bet) does not allow the PRC to build communications infrastructures of any kind in the country. Israeli communications companies toe the line with the security authorities’ position in refraining from using Huawei and ZTE in their communications equipment, and consequently it is doubtful they will be installed in Israel’s 5G communications network (Segev, Ella, & Orion, 2019).

Moreover, the Trump administration also warned Israel that deep involvement by Chinese SOEs in the future management of the major port in Haifa, where SIPG built the pier and leased management rights for 25 years, could jeopardize the continued use of the port where US Navy’s Sixth Fleet docks regularly (Kampeas, 2020). Chinese port operators could monitor US ship movements and maintenance activity and might have access to information systems, increasing the likelihood of threats to Washington cybersecurity and information. A US Congress report recommended that the administration convey to the Israeli government its grave security concerns concerning the leasing arrangements of the Port of Haifa and urge consideration of the security implications of such Chinese foreign investment in Israel (Zanotti, 2021). Although Washington urged Jerusalem not to collaborate with SIPG on the port’s expansion, Israel ultimately rejected the request after an internal review of the deal (“Report,” 2021). In October 2021, the USS O’Kane of the US Navy’s Fifth Fleet was docked at the Port of Haifa as part of the new bilateral cooperation between the Israeli Navy and the US Fifth Fleet (Egozi, 2021).

US officials have also voiced concern that Chinese construction and operation of major Israeli infrastructures could complicate US-Israel cooperation. The primary concern regarding investment relates to infrastructure projects that could further Chinese foreign policy objectives in the region. Chinese operation of Israeli infrastructure could present surveillance risks to US national security (Efron, Schwindt, & Haskel et al., 2020). In May 2020, a bid for a $2 billion water desalination plant (Sorek 2) by a Chinese company (Hong Kong-based CK Hutchison Group) was rejected in favor of a local company, IDE technologies (although its bid was more attractive, and the price was lower by a considerable margin than that of the other bidders). This decision came after the Trump administration’s pressure to limit participation by Chinese companies in sensitive infrastructure projects in Israel (Gabison, 2020).

Biden administration officials encouraged Israel to establish a more robust screening system for foreign investments. The new committee, led by the prime minister, would replace an existing voluntary committee that falls under the Finance Ministry that does not cover core areas in which China invests. However, the Prime Minister’s Office has yet to decide. Meanwhile, for one of Israel’s largest and most complex infrastructure projects, the Green and Purple Line light rail tenders were seen by officials in Washington as a significant test of this Israeli government’s policy toward China. Several local companies combined with foreign firms competed for the multibillion-dollar deal (NIS 15 billion tenders), including Chinese companies (their bid was significantly lower than other bids). However, the tender committee of the Metropolitan Mass Transit System decided to select the group’s bid of Alstom, Dan, and Electra to carry out the second phase of the Green Line project. The Shafir Group and the Spanish CAF won the Purple Line tender. The disqualification of Chinese companies (CRRC and CRCC) in the tender will satisfy the Israeli government, faced with pressure from the US regarding Chinese involvement in establishing infrastructure projects in Israel (Harkov, 2022).

Conclusion

The US and China are at a critical moment of great power politics, a path fraught with conflicts, rivalry, and competition. This competition occurs against a backdrop of sluggish growth in the world economy, a fragmenting international order, and significant domestic challenges within both powers. Undermining Washington’s dominance is an increasingly important component of Chinese foreign policy in the Middle East. It contributes to China’s evolution from a passive regional actor to a more vocal and aggressive one. Therefore, the Middle East is becoming one of the primary arenas for great power competition.

Peace and stability in the Middle East are built on both sides of the equation. The geo-security equation, based on a security partnership with the US, is balanced by a geo-economic equation (economic and technological partnerships) with Beijing, making the region the most sensitive spot globally in case of an open-ended rivalry between the two powers over who controls the world order. Hence, maintaining a balanced relationship and keeping this geo-security and the geo-economic equation is an essential guarantee for the Middle East countries (including Israel) to avoid negative ramifications if the US-China competition deepens in the region. However, the intensifying rivalry pressures local governments to side with one of the two powers. Consequently, they could lose either the security partnership with the US or the economic and technological partnership with China.

In recent years, the China-Israel relationship has maintained a sound growth momentum. Economic ties, especially those involving technological innovation, major infrastructure projects, and cooperation under the BRI framework, have served as the foundation of this increasingly warm relationship. In many ways, China’s current flagship project posits Israel as a focal region and hub, whether as a center for the BRI, a substantial economic and technology partner, or a geopolitical ground for advancing international agendas. First, Israel’s unique geographical position on the Mediterranean Sea is a crucial point between the three continents. Israel could become a vital part of the BRI, especially its MSRI component, with its new ports on its Mediterranean shores and the potential railway routes. Second, the discoveries of potential energy sources on the shores of the Mediterranean have increased, making Chinese options to access energy sources expand significantly when the indicators of economic convergence between Israel, Greece, and Cyprus are increasing.

Third, since the Abraham Accords, there has been growing openness in other Arab and Muslim countries to join the process of normalization with Israel. This has made China pay attention to the new trade and corridors between the Arab countries and Israel, which can be used as a trade route or new hub for a direct connection between the Gulf and the Mediterranean Sea. Fourth, the cooperation under the BRI framework helped the Sino-Israeli relationship grow steadily and rapidly, especially in the commercial sphere, from the growth in Chinese investments in Israel from $1.5 billion in 2012 to $13.2 billion in 2021; these may grow even further once the Israeli integration into the BRI is completed. Finally, the Israeli-Chinese cutting-edge technology and innovation cooperation would continue by moving away from the technology that provokes the US. The technology cooperation will focus on other sectors such as new energy sources, agriculture, development of transport technologies, life sciences, and more.

Israel must manage a foreign policy of delicate balance, hedging, and risk management, namely, developing its economic and technological partnership with China while maintaining a security partnership with the US.

This study examines how the great power competition and strategic rivalry impact the Sino-Israeli bilateral ties. The findings show that the escalation that is now taking place in the match between the powers leads the Israeli government to make decisions (e.g., the Green and Purple Line and Sorek 2 desalination plant tenders) that undermine economic-technological cooperation with China. A senior Israeli diplomatic official said recently that Israel would update the US government about any major infrastructure and technology deals with China and reconsider them at Washington’s request (Harkov, 2022).

The Israeli government faces the complex and delicate challenge of managing its relations with Washington while integrating into the BRI framework, especially in infrastructure projects and technology transfers. A choice between the US and PRC would be costly for the Israeli government—Chinese BRI projects and the economic opportunities accompanying them are large and growing. Nevertheless, the choice is clear for Jerusalem more than for other regional countries. The US is Israel’s main strategic and trading partner globally (it receives billions of dollars in military aid from the US every year). The friendship between Israel and the US runs deep in shared values, economic partnership, strategic cooperation, humanitarian assistance, and cultural ties. There is no substitute for American support for Israel, making it a top strategic asset for its national security.

Therefore, Israel must manage a foreign policy of delicate balance, hedging, and risk management, namely, developing its economic and technological partnership with China while maintaining a security partnership with the US. According to the Israeli senior diplomatic official, Jerusalem aligns the United States if it must choose a side and will not fight with Washington over China. Still, it would prefer to keep its decisions on the matter under the radar, so it does not lose business and investments from the world’s most populous country (Lis, 2022). Israel tries to adjust to the strategic competitive relationship while sustaining its close partnership and taking advantage of opportunities with China. Nonetheless, the PRC may use threats, pressures, or exploitation of future opportunities to promote its position at the expense of Washington, making it hard for the Israeli government to continue its balanced policy.

In the era of great power competition, Washington expects that its allies around the globe may have to make stark and brutal choices between the two great powers. Hence, Israel should continue its relations with China while maneuvering between the interests of Washington and Beijing and adopting a cautious but independent approach. Jerusalem must continue with the requisite caution to expand its cooperation under the BRI framework (with wisdom, sophistication, and minimum concession) while understanding Washington’s serious worries and the significant, costly limitations these concerns place on Sino-Israeli geo-economic ties (economic and technological partnership). However, this does not mean it must remain passive in the triangle of relations with Washington and Beijing, since surrendering to American dictates will only lead to continued pressure. Instead, Israel must make it clear to the administration that it is attentive to its concerns but must act to safeguard its interests. Although Israel’s scope of action is limited, it is better to initiate, promote dialogue, and demonstrate resolve on this sensitive issue rather than surrender in advance and drift after developments.

Authors

Mordechai Chaziza - Dr. Mordechai Chaziza is a senior lecturer in the Department of Politics and Governance at Ashkelon Academic College, specializing in Chinese foreign and strategic relations. He has focused on China’s foreign policy in the Middle East and North Africa (MENA) and its relations with individual states; China and the Arab-Israeli peace process; and China’s non-intervention policy in intra-state wars. motih1308@gmail.com

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