Israel: Jurisdiction In The Spotlight - China

Last Updated: 22 October 2019
Article by Yigal Arnon & Co

China and Israel – the Next Phase

"Israeli technology, Israeli technology, and Israeli technology" – the three things in which China is interested, according to Israeli Prime Minister Benjamin Netanyahu after his visit to China in 2013. The relationship has long since expanded to cover trade, investment, construction, educational partnerships, scientific cooperation, tourism and more, and this November, negotiating teams will meet for a further round of talks on finalizing a free trade agreement between Israel and China.

And the two countries share more in common than one might think. "The modern Chinese economy and the Israeli innovative economy are today, more than ever, complimentary and synergetic," adds Ilan Maor, Vice Chairman, Israel – China and Hong Kong Chamber of Commerce . According to the data released by China's Ministry of Commerce, the volume of trade between the countries stood at USD13.9 billion in 2018, a 6.1% increase from 2017.

At the heart of the relationship has been China's unquenchable hunger for innovation and interest in advanced technology. For Israel, China, its second largest export market after the U.S., is a vast source of potential funding and appeals to many Israeli companies, especially those interested in software, semiconductors, IT, biotech, and agriculture.

Since 2013, the two countries have signed bilateral and business agreements valued at over USD 25 billion; there are annual meetings of the Israel-China Joint Committee on Innovation Cooperation (JCIC), the last one attended by China's Vice President Wang Qishan in October 2018; and many senior executives from China are also visiting Israel. "This is true of leading Chinese business groups, including Alibaba, Fosun, DJI, and many others, but also for other mid-scale and large-scale companies, while more Israeli SME's executives are invited and traveling to various activities and events in China," adds Maor.

"China is hosting some of the largest, most prominent and popular events worldwide. Semicon China and CMEF are based in Shanghai, while others, such as World IOT are based in less well-known cities like Wuxi, in Jiangsu province," Maor points out. In Shandong province, the 3rd largest by GDP (USD 1.1 trillion), over 100 Israeli start-ups attended this year's GoforIsrael conference, spotlighting greentech, water technology, renewable energy, life sciences, AI and many other sectors. China also looks to Israeli technology in defense, security, and counterterrorism as a means of addressing China's security needs, while Israel's achievements in agricultural technology, medical technology, water technology are also highly relevant to China's domestic agenda.

Chinese Investment Continues to Grow

As such, Chinese investment in Israel continues to grow. Over the past five years, according to an IVC Research Center report, around USD 1.5 billion from China was invested in around 300 Israeli companies. IVC also reported that over the past two years the average number of direct Chinese investments in Israeli companies each quarter grew from 15 to 20. All in all, in 2018, Chinese investors have been involved in 12% of the financing round by Israeli startups, compared to 7.5-9% during 2015-2017. In 2018, the Chinese also participated in six of the 17 large financing rounds (USD 50 million or more), also a higher proportion than previously.

"More Chinese investment is directed at Israeli tech start-ups (with around 80- 90 investments conducted annually), driven by both investing companies, as strategic investments, as well as by corporate funds, private equity and venture capital funds – such as Alibaba, Fosun, Horizons Ventures, CEIIF, Grit, Radiant and others," adds Maor

The opportunities for Israeli companies are 'almost endless'

"A large share of the large Israeli tech companies are already active in China and we now see a growing number of SME companies and even startups making their way. The opportunities are almost endless. China is in many ways the new 'land of unlimited opportunities.' The main sectors of interest for Chinese companies - for cooperation and investment alike - are advanced manufacturing, microelectronics & IC, IOT solutions, medical device, smart and autonomous automotive, and agritech." says Maor.

Sungbo Shim, Managing Partner in the Beijing office of Squire Patton Boggs ("SPB") agrees. "Chinese companies are mainly attracted by the technologies in software, semiconductors, telecommunications, medical, agriculture, and financial sectors. These are viewed as the strongest areas and are expected to remain so for some years. Most Chinese companies invest in these sectors to get technologies to support their business in China and strengthen their patent portfolio to compete with their competitors."

Simon Weintraub, Co-head of the China practice at Yigal Arnon & Co., adds "Chinese companies for a long time have also been interested in Israeli healthcare innovation including medical devices and digital health companies. Most of our investment work representing Chinese companies investing in Israel have been in this space. Auto-tech and agri-tech are other areas that are very hot and of great interest to Chinese companies coming to Israel today.

The agriculture and technology sectors had typically accounted for most of the total Chinese investment in Israel. In recent years, ChemChina acquired Adama, an Israeli crop protection company, for USD 2.8 billion. China Bright Food Group took over Israel's Tnuva Food Industries. In the ever-evolving healthcare sector, Israeli cannabis company, iCAN: Israel-Cannabis is teaming up with a Thalys Medical Technology, a Chinese healthcare conglomerate, to focus on medical marijuana. China looks to Israel as a model in greentech, with Chinese telecom giant Huawei, typically known for smartphones, entering the Israeli solar power market to sell inverters, which help to convert solar power into energy for the electricity grid. China-based consumer electronics company Haier Group Corporation is dipping its toes in the Israeli petrochemical sector by partnering with Israeli oil refining and petrochemicals company, Bazan Group – and these are just the recent tip of the iceberg.

Close ties brings challenges and risks

While there are simmering tensions between China and the U.S., Israel's principal ally, there are opportunities for Israel, if companies do their homework. "Chinese investments in Silicon Valley have slowed down," said Shim. "Chinese investments in high-tech start-ups in the U.S. face strict restrictions and are subject to approval under CFIUS ("Committee on Foreign Investment in the United States"). As a result, Chinese investors who previously focused on U.S. based technology companies have to look for targets elsewhere. Israel, with relatively lenient policy on foreign investments in high-tech companies, significantly lower costs of investment and operation than Silicon Valley, has become an attractive target for Chinese investors looking for cutting-edge technologies."

"Any Israeli company with a U.S. subsidiary and /or U.S. activities needs to be concerned about CFIUS today when considering an investment from a Chinese investor," agrees Weintraub. "We have seen potential investments and acquisitions of Israeli companies fail as of late because following a CIFIUS analysis it was determined that there was a great risk that the U.S. regulators would veto such a transaction. This is a major concern today for our clients. There are structures that can be created to mitigate the risk, and this requires strong guidance and expertise."

Israeli companies need to consider possible ramifications of Chinese backing, especially if operating in fields with national security and data privacy implications, including cybersecurity, energy and mobility, "Companies operating in such domains may find their ability to do business with certain American partners, especially government entities diminished if they have Chinese backers, "former U.S. ambassador to Israel, Daniel Shapiro said in a recent interview with financial newspaper Calcalist.

To view full article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions