Business between China and Israel is brisk, and that is partly caused by the fact that both economies complement each other. Where China needs innovation, Israel needs a sizable market to sell its innovations, a market it does not have among its hostile neighbors. Shanghai-based lawyer Mark Schaub just returned from his latest trip to Israel and made this overview.
Mark Schaub:
Enter Israel: Production Pygmy but Innovation Giant
Israel’s credentials for high-quality innovation are clear, it is global number one per capita in:
Patent registrations
R&D spending
Number of start-ups
However, with a population of only 8 million and a … challenging … neighborhood Israel is constrained from becoming a major manufacturing center. Traditionally Israeli start ups have looked to the US and to a lesser degree Europe as a source of funding or as a potential acquirer.
Start Up Nation Meet Buy Up Nation
“Follow the Money”
In recent years China outbound investment has accelerated exponentially. China is rapidly becoming the ‘buy-up nation’. China’s provincial level SOEs and private enterprises are increasingly interested in acquiring overseas technology. Israel has the technology China needs.
“China is Enough”
Interestingly, many Chinese enterprises are willing to buy or license technology exclusively for China rather than requiring global rights. With a population of 1.35 billion, the world’s second largest economy and a long “to do list” China as a market is large enough for the most ambitious of companies.
Political Support
The complimentary nature of China and Israel’s economies has not gone unnoticed by either side. Israel’s Chief Scientist stated that Israel is ‘good at innovation and technology transfer’ and China ‘can scale up manufacturing and beyond.’ The Third Plenum was a hot topic at Israel’s Business Conference on December 8 2013.
Israel and China’s political relationship has had its up and downs over the years. Israel recognized the People’s Republic of China all the way back on 9 January 1950 but China only formally established diplomatic relations in 1992. For many years (until the late 1980s) Israeli passport holders could not even visit China. Despite this there was co-operation on a variety of fronts (including military) in the background.
In recent times the political and economic relationships have never been better. The Chinese Government is actively taking actions to improve and boost economic relations. In 2013 China and Israel signed both export enhancement and trade agreements.
More in the King&Wood Mallesons´newsletter.
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