China is expected to surpass the U.S. as Israel’s biggest collaborator

Israeli Tech Startups Attract Chinese Investors

China’s Search for Tech Investments Leads them to Israel

Liu Yandong, vice premier of the People’s Republic of China, in a white jacket, and  Avi Hasson, Israel’s chief scientist of the Ministry of Economy, in a red tie, attend  a three-day tech conference held in May in Tel Aviv.

Liu Yandong, vice premier of the People’s Republic of China, in a white jacket, and Avi Hasson, Israel’s chief scientist of the Ministry of Economy, in a red tie, attend a three-day tech conference held in May in Tel Aviv. ZVIKA GOLDSTEIN

Dec. 16, 2014 5:28 a.m. ET

TEL AVIV—As China scours the world for tech investments, it is increasingly flocking to Israel for the next big thing.

Baidu Inc. ’s investment in Uber Technologies Inc. last week is just the latest big Chinese investment in a foreign firm. But Chinese executives and investors say the tech startup hub of Tel Aviv is fast becoming a frequent stop in China’s global hunt for companies, startups and investments. They are joining American, European and Russian investors who have been shuttling in and out of Israel for years—many of whom have taken advantage of the country’s high-tech workforce to set up research and development beachheads.

China’s hunt for innovation spans the globe, with investments in Silicon Valley, Europe, India, Korea and Malaysia. Israel is a relatively late addition, but a welcome one amid Tel Aviv’s tech startup community.

Politics may also factor in. “Israel is a bystander in the game between China and the U.S. The competition between the two gives Israeli startups an edge. A Chinese phone manufacturer, who wants to compete with Apple, would feel more comfortable with an Israeli entrepreneur, without fearing patriotism or favoritism by an American company. All things being equal an Israeli company is more likely to get a Chinese investor’s money,” said Alon Sahar, a partner at Meitar Liquornik Geva Leshem Tal law firm.

“China is our fastest-growing market and we figured we needed Chinese partners and investors,” said Tomer Bar-Zeev, chief executive of Tel-Aviv-based IronSource Ltd., an advertising technology company.

Over the next two years, China is expected to surpass the U.S. as Israel’s biggest collaborator in the number of joint government-backed development projects, said Avi Luvton, executive director for the Asia Pacific region at the Israeli Industry Center for R&D.

“American investors might not be seeing it yet, but they will feel the competition soon,” said Koby Simana, IVC Research CEO.

“The first two destinations we’ve targeted for venture investments were the U.S. and Israel,” said Daniel Tu, group chief innovation officer of the Ping An Insurance (Group) Co., a financial services group. In September, Ping An Ventures, the company’s venture capital outfit, took part in an $85 million pre-IPO funding round in Mr. Bar-Zeev’s IronSource.

Mr. Tu says, in some cases, Israel entrepreneurs are easier to work with. “Silicon Valley startups are keen on disruptive technology. I find Israeli entrepreneurs more practical as they build out their companies. They now view China as a viable option for both growth and exit strategies,” he said.

Ping An Ventures has made eight investments in Israeli startups so far. Last week, it said it would co-lead an investment of $27 million in Israeli online trading platform eToro Group Ltd.

Up until 2013, Chinese investments in Israeli technology companies and venture funds that invest in them were rare. But the pace has accelerated rapidly over the past two years. Israel’s National Economic Council expects tech deals between Chinese and Israeli firms to total $300 million this year alone, up $50 million from 2013.

Chinese investors aren’t writing the sort of multi-billion-dollar checks they have recently in other industries. Chinese firms have invested heavily in assets such as North American oil fields and African mines. In Israel, China National Chemical Corporation (ChemChina) bought Israeli pesticides manufacturer ADAMA Agricultural Solutions Ltd. for $2.4 billion in 2011. This year, China’s state-owned Bright Food Group Co. bought a majority stake in Israeli dairy company Tnuva Food Industries Ltd. in a deal worth $960 million.

When it comes to tech, Israeli companies are still much smaller than counterparts in Silicon Valley, and Chinese companies have kept their investment to a few million dollars apiece, sometimes alongside non-Chinese venture-fund partners. Chinese firms also have looked at investments that may have benefit back at home. As part of its deal with eToro, the Israeli company agreed to expand its operations in China.

Chinese provinces and companies are also seeking new technologies in alternative energy, agriculture and water management to address some of the issues caused by China’s rapid urbanization.

“Before, companies in China were trying to replicate. We are now trying to lead. Technology is a deciding factor,” said Jing Wang, senior vice president of engineering at Baidu, a leading Chinese online search and e-commerce company.

Baidu, the Uber investor, has become one of the highest profile Chinese companies on the hunt in Israel.

Last month, Mr. Wang led a delegation of Baidu executives on a visit to Israel. The delegation met with numerous Israeli startups. Around the same time, Baidu CEO Robin Li met in China with Israeli’s economy minister Naftali Bennet. The Chinese company has invested an undisclosed sum in Israel-based venture fund Carmel Ventures. Earlier this month, it announced its first investment in an Israeli startup: a $3 million investment in Pixellot Ltd., which develops video cameras that can be controlled remotely to provide footage of sports and music events. Baidu has also recruited two Israeli technology scouts to search for possible tech investment and acquisition opportunities.

“We’re interested in investment and M&A possibilities anywhere in the world where there are great tech entrepreneurs, and there is no doubting that Israel is such a place,” said Kaiser Kuo, Director of international communications at Baidu.

And fresh from its record breaking IPO in SeptemberAlibaba Group Holding Ltd. ADS is expected to start operating in Israel, according to three people familiar with the matter. The Chinese e-commerce behemoth is in the final stages of investing in an Israeli e-commerce startup, in what may turn out to be a base for an R&D center, the people said.

Alibaba declined to comment.

The deal-making extends to Israel’s biotech sector. Shanghai Fosun Pharmaceutical Group Co. is expected to beef up its Israeli presence with acquisitions of more companies, people familiar with the matter said. Last year Fosun Pharma acquired Alma Lasers, a company that makes advanced skin care products for $240 million. That deal was the first significant Chinese technology M&A deal in an Israeli based company.

A Shanghai Fosun Pharmaceutical spokesman said the company “will continue to pay close attention to the latest development in advanced technologies of the Israeli health-care sector, and is looking for opportunities in cooperation with Israeli companies.”

Write to Orr Hirschauge at

December 16, 2014 | 6 Comments »

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  1. China so far is sucking the best out of Israel while providing NO political benefits publicly or privately!!!
    What about alleviating rising poverty?

  2. China is becoming a more important power than the USA, and the combination of China, India, and Russia will outpower the USA, the rest of the English-speaking world and the EU-NATO countries combined. China and India, at least, have no history of anti-Semitism whatsoever, and are strongly inclined to buy into Israel’s technology, which is some of the most innovative in the history of mankind. Russia has an anti-Semitic history, but that is counter-balanced by their now-permanent war against the Moslems in their own country and by the realpolitik of Putin’s new ruling class of that country.

    American democracy, at least as Thomas Jefferson envisioned it, has not outlived the development of an urbanized, corporate-controlled, economic and political oligarchy, and today’s democracy is shattering whatever is left of a once-proud society. In its place has arisen a society in which forced toleration accepts the legitimacy of homosexual marriages, casual usage of dangerous narcotics, and a police force whose white members are forced out of their jobs for defending their lives against black street hoodlums who try to kill them. The Jews here mostly support all of the above, and increasingly now, hatred of the Jewish nation that mistakenly gave birth to them, and indifference to the Jewish state which is the only place in the world where our all-but-broken nation can regrow itself. The Christians here have commercialized and trivialized the celebration of the man they consider their savior. The family structure in America is a washed-out remnant of the small, brave family-based tribes that crossed this continent in ox-drawn carts in service of the manifest destiny of our country in the 1840s, and who fought a terrible and bloody civil war to regain a complete United States of America and to free the black slaves held to bondage therein. From my 80-year-old sensibilities, there is no resemblance of today’s America to the one that sent armies, navies, air forces, and the military storehouses of war to help defeat Hitler’s Nazis and Tojo’s imperialists in Southeast Asia and the Western Pacific, in the 1940s. For those of us who know how to sift out the tell-tale signs of societal decay, what we see is a government, economy, and population that can no longer afford to sustain themselves. It truly is too bad Washington, Jefferson, Monroe, Madison, and Lincoln could not have given this commonwealth a soul. We badly need it, but it is not in place, and its sudden appearance is increasingly unlikely. So, all things considered, we show all the signs of a country that cannot and shall not compete with the rising powers of Eurasia and East Asia, either in the market place and probably neither so on the battle fields, should it come to that.

    All things considered, the above-cited countries will all prove to be sturdier allies of Israel and the Jewish nation than ever was possible from the Europeans, or my fellow Americans as well.

    Arnold Harris
    Mount Horeb WI

  3. “especially if Jokers are allowed in play, and Israel’s “Joker” card has on it the universal picture of the nuclear chemical sign.”

    Hey, I like this guy…. 🙂

  4. Ken Price PhD wrote to me

    If Israeli high tech is so important to the Chinese (who are likely to reverse engineer whatever they buy or steal from Israel and then manufacture the equipment for themselves and to sell the derived weapons to the Chinese-allied Arab dictatorships), why doesn’t Israel demand a POLITICAL payment as the price of admission to Israeli high tech?
    To wit: veto any Pal anti-Israel resolutions at the UN. This will undercut Obama and make his political threats worthless, ditto for the Europeans, who in a couple of years will be dependent on Israeli natural gas. Why is Israel opening itself up to the Chinese without getting something in return, other than Chinese investment cash?

    I replied

    Not only is Israel getting investment cash to compete with the American cash pushing prices higher, she is also getting exposure to the largest market in the world.

    Yes the hope is that China might be induced to veto anti-Israel resolutions sometime in the future but it is too early to exact such a commitment from them.

    India is also gaining in importance to Israel as a trading partner and much more.

    he replied

    US companies have thought the same way for two decades. The Chinese always require a Chinese partner in companies that open factories in China, the Chinese are very, very corrupt. US companies mostly lost money on their investments in Israel. Don’t know about selling weapons to China, other than to expect the Chinese to reverse engineer, sell to Arabs, and then quit buying systems from Israel. Don’t let them make freirerim out of you. Example. American builders bought tons of drywall from the Chinese —cheaper than from US manufacturers and elsewhere — and used the drywall in the construction of homes in the US, especially in Florida. Over the past couple of years, the drywall (i.e. the walls in people’s homes) have been disintegrating and collapsing, forcing people to move out into the street, causing massive lawsuits and major economic losses to contractors, builders and homeowners. I’ve seen the tunnel the Chinese built in Haifa. I hope it works better than the crap they sell to the US. Don’t let the Chinese make you freirerim.

    The time to extract cooperation on the political front from China is now, not tomm. Yes, India is very important, especially since Israel can sell to India stuff that it can’t sell to China (also note that India bought Israel’s Spike anti-tank missile over the US’s javelin – kol ha-kavod).

    The chinese should worry about Israel’s defense arrangements with India, though of course Israel shouldn’t let china affect its relations with India in the slightest. Please pass on to Bibi, my warning, don’t let the Chinese make freierim out of y’all, and make them pay in poliitcal capital now.

    One point I neglected to make is that China’s economy and economic real estate bubble is, according to experts, poised to collapse. The economic miraculous growth of China may be at its end at this cycle. While China has billionaires and many millionaires buying BMW’s and Bently’s, the majority of Chinese are poor, not middle class, and having moved to the cities to seek jobs find themselves living in slums. What will happen to the hundreds of millions when the economy slows, if not tanks? Israel has much to sell to better the lives of the Chinese, such as agricultural equipment and techniques. Consumer products for the billion “consumers?” I think not.

    The Chinese -and remember, the biggest business conglomerates are owned by the PLA (People’s Liberation Army). The Chinese are running to Invest in Israeli hi-tech, not because they want Waze devices in every Chinese auto to reduce traffic congestion. They invest in high tech because they know it’s the product of hativat 8200. The Chinese are building new, ultra modern military systems today, submarines, stealth fighter jets and so on, with designs bough or stolen from the US and perhaps Israel, while the US nuclear forces are mouldering and the American first line jets are nearing the end of their useful lives, while the US President has cancelled production of the F-22, the greatest jet in existence, while putting all his eggs in the flawed and horrendously expensive F-35’s. Obama plans to shrink the US military order of battle to levels in existence pre-WWII.

    The Chinese are strengthening their military while the West weakens theirs. Obama frightens the Chinese so little, that they fly fighter planes doing acrobatics in the airspace of US planes. I don’t know if China has 10 million men under arms or 100 million. What does it matter if Obama is shrinking our men and women under arms to a ludicrous, 450 thousand? The Chinese consider the South China Sea now a Chinese lake and are instigating clashes with the naval forces of Vietnam and other SE Asian countries, in order to intimidate their governments to stay away from the water and the precious minerals to be found beneath the waves.

    While America and the West have been sleeping the past 1-2 decades, the Chinese have been buying up Africa and Central and South American areas and mines that contain rare earth minerals necessary for what? For sophisticated, hightech military use. The Japanese are so frightened of the rising Chinese tiger, that their Diet is debating changing their Gen. MacArthur-written constitutional prohibition against external war to a clause allowing an aggressive and appropriately armed Japanese “Defense Force” that actually has the ability to defend the Japanese islands by pre-emptive or devastating retaliatory attacks against an enemy invasion or missile attack.

    The Chinese lust after the Japanese Sunsuku islands to such an extent that the Japanese are increasing their military budget to acquire additional hightech weapons of war to protect themselves against Chinese invasion which could come in ten years or ten weeks.

    In other words, Israel has natural customers for hightech dual-use or frankly military use armaments in the militaries of Japan, Taiwan, Vietnam, Cambodia, Laos, Australia, the Philippines, and, of course, democratic, pro-Western India.

    Israel cannot simply sell to China everything in its Aron Kodesh of secret technical equipment and knowledge. For one thing, this will seriously damage relations with the U.S. as well as with the American people who don’t want to see Chinese ICBM’s or drones loaded with Israeli-made electronics dropping explosives on San Franscisco.
    Israel must be extremely careful in allowing or prohibiting Chinese companies (remember, often PLA owned and managed) from buying or buying into Israeli companies. The same goes for willy-nilly allowing Chinese students to study electrical engineering or computer science or even pure science such as physics in the Technion or Weizman Institute or in the second tier, but still outstanding universities in Israel.

    The US and Western Europe have already discovered some of these truths. But, commonly, the needs of Departments of Commerce, Ministries of Trade and corporate officers, boards and shareholders needing to line their pockets with gelt, have over-ridden the common sense principles of national security. It’s inconceivable to me that China did not know that North Korea was building a nuclear facility in Syria, yet they did nothing to stop the project. The principle of non-proliferation was respected and enforced by Israel in Sept 2007.

    What Israel needs to do is weigh very carefully what hightech skills, if any, it is prepared to sell to China (or to anyone for that matter) and what off-the-shelf hightech equipment can safely be sold, that won’t be resold to Israel’s enemies, or duplicated by Chinese engineers and then sold to other buyers as Chines competitors to Israel.

    If Israel is playing poker with world regimes and holds a pair of deuces, remember how to bluff (as Israel routinely did from, say, 1939-1967). If, on the other hand Israel has a full house, 3 cards with pictures of natural gas platforms and 2 remaining cards each numbered “Unit 8200,” that’s a winning hand that beats anything, especially if Jokers are allowed in play, and Israel’s “Joker” card has on it the universal picture of the nuclear chemical sign.

    Fear not to negotiate from your position of strength. Don’t let the Chinese or anyone else push you around, frighten you or make you freierim.
    Ken Price, Ph.D.
    Dallas, TX




    Foreign Trade Administration at the Israeli Ministry of Economy to Assist Companies as Part of “Smart Money” Program, in Effort to Extend Activity in International Markets * Additional NIS 12.5 Million to be Allocated in
    Coming Weeks to Additional Companies, Including Special Funding for Ara Sector

    JERUSALEM, December 16 2014 – The Foreign Trade Administration at the Israeli Ministry of Economy approved NIS 11.2 million for the first stage of the “Smart Money” program. In the first stage, 57 companies submitted 79 requests, of which 39 requests were approved for 31 companies. The companies that were accepted will receive ongoing marketing assistance from Israel’s
    trade attachés stationed in the target countries and from experts appointed especially by the “Smart Money” program for the duration of the program, in an effort to increase exports and fulfill the goals set in the companies’ marketing plans for the target countries.

    The “Smart Money” program aims to reach significant growth in the scope of sales by participating companies in international markets, while focusing on developing marketing capabilities in one or two predefined target markets.

    As part of the plan, the Foreign Trade Administration at the Israeli Ministry of Economy will grant partial funding for expenses intended to market products abroad or for purchasing services to advance marketing efforts in target markets, including: data aggregation, insurance, training for export activity, presenting products or services including the establishment of commercial presentation facilities, establishing a marketing and distribution infrastructure, participation in expos and conferences, scouting for marketing consultants with knowledge of the target markets, use of web-based marketing and sales tools, advertising and

    A company’s marketing plan can be up to NIS 1 million, of which the Foreign Trade Administration can subsidize up to 50%. In the first leg of the plan, NIS 11.2 million was provided to companies whose proposals were accepted.