China has a long-held reputation in the international community
for being closed off from outsiders — a reputation that it
cultivated for thousands of years. In recent decades, however, this
past custom has rapidly been changing and
China has become a world leader in manufacturing and
production, leveraging a large population and an immense
technological skill base. Today China is pushing for more growth,
looking to drive innovation to launch its economy into the future.
This has led to a trend of opening up to the world, and in keeping
with that trend, China has begun to reach out to Israel.
Today Israel is only the third country with which China has
developed a multi-visit visa program to encourage business and
tourist travel. This highlights the importance of Israel's role
as an innovation center for new technologies, particularly in the
fields of Agrotech, Healthcare, Fintech and cyber security, and
China's desire to strengthen its cooperation with Israeli
In March, Prime Minister Benjamin Netanyahu and Chinese Vice
Premier Liu Yandong announced that Israel and China were starting
negotiations for a bilateral free trade agreement. A free-trade
agreement between Israel and China may not only increase the gross
national product of both countries, but also would most likely
double the total value of traded goods between both countries,
which currently stands at $8 billion.
Challenges to Navigate
The two countries have much to offer each other, and the ability
of Israeli companies to offer technological solutions which are
applicable to the needs of the Chinese market is of significant
interest to the Chinese government and Chinese investors and
Despite the many advantages which such cooperation can yield to
both countries, there are many obstacles which hinder the
cooperation between the two countries, such as cultural gaps which
have a material effect on negotiations and the ability to locate a
strategic partner on the other side, as well as differences in each
party's expectations with regard to a given transaction.
Whereas many Israeli entrepreneurs and companies set their
companies up for future exits, Chinese investors are in search for
technologies that could benefit the Chinese market and therefore
are looking for long term projects that are not necessarily focused
solely on their return on investment.
In addition, another challenge which is inherent to Israel-
China collaborations is the need to be familiar with Chinese laws
and regulations and the ability to navigate the heavy bureaucracy
which is associated with operating in China. In order to overcome
the above challenges it is highly recommended to receive counsel
from professionals who possess the know-how which in bridges the
cultural and legal gaps between the parties, and who can advise on
certain material issues which are synonymous with doing business in
China, such as proper tax structures, or expatriating funds which
were generated in China.
Originally published May 11, 2016
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