Israel Tightens Scrutiny on Chinese Investments, Changes Policy


Foreign Affairs

Tel Aviv: The US administration has increased its campaign against the involvement of Chinese companies in infrastructure programs in Israel. That resulted some days ago with the disqualification of Chinese companies that made proposals for the construction of two lines of the light train project in central Israel.

Israeli sources said that the US pressure this time was “heavy” based on the fact that the planned railway lines are being built in the “close vicinity” of some Israeli defence sites working with the US and what is defined as “critical communication lines.”

Nadav Argaman, former head of the Israeli internal security service (Shin Bet), in a lecture that was reported by the Israeli media said that the Chinese investments in Israel could put state security at risk, Channel 10 News reported.

According to the report, during a speech at the Tel Aviv University, Argaman said that legislation was needed so these investments could be supervised, citing Chinese interests in infrastructure projects like the new Haifa port and the Dan Region light rail, and their involvement in large Israeli companies.

According to Israeli daily Calcalist, the tender committee of the NTA (metropolitan mass transit systems ) organization, in charge of building the light train rejected the joint proposals submitted by two Israeli companies and two Chines companies CRCC and CRRC.

After disqualifying the two groups that included the Chines companies, the committee selected two other groups that are not working with Chines companies. The tenders are for the construction of the Green and Purple line to serve some of Israel’s most populated areas.

A few months ago, senior officials in the Biden administration spoke out against the involvement of Chinese companies in Middle Eastern economies, saying it could hurt their countries’ relations with the United States and that it could even hurt those countries’ sovereignty. The order signed by President Joe Biden is an extension of the order signed by former President Donald Trump, which bans investment in 59 Chinese companies (including CRRC), which according to the US administration are directly or indirectly linked to Chinese military and intelligence.

About a month ago, it was announced that following American pressure, Israel was changing its policy regarding Chinese investments in the country and that the state would update Washington and operate transparently regarding big projects. The US asked Israel to refrain from working with Chinese companies in major infrastructure projects. In projects that are already completed like the new Haifa port the US has asked Israel to take some security measures.

According to a paper written by Doron Ella, a researcher in the Israeli Institute for National Security Studies (INSS) China is no doubt aware that Israel is under American pressure to reduce the involvement of Chinese companies in its economy. Therefore, it is possible that China decided not to submit bids for certain tenders, or refrained from making deals, that from its perspective could be thwarted by US opposition. For example, in May 2020, a few days before a decision was made on the Sorek 2 desalination plant, US Secretary of State Mike Pompeo arrived in Israel and warned against Chinese investments in critical infrastructure. In the end, a non-Chinese competitor won the tender, due to price considerations according to government sources.

“The nature and scale of Chinese investments in Israel have indeed raised concerns in the US, as they are often in technological sectors that US views as critical to its national security – e.g., computer chips and semiconductors, IT and software, life sciences (especially medical technologies), internet and communications technologies; these all have the potential to contribute to China’s future development, including in the military sphere, and to strengthen it in terms of technological competition against the US.”

The researcher writes that China has begun applying for tenders in the water and electricity sectors as well, so far with partial success.

” America’s concern in this context is the translation of China’s investments into influence and strategic access, and the creation of growing Israeli dependence on Chinese companies building, upgrading, and operating Israeli infrastructure facilities, some of which are in security-sensitive areas.”