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Economic Ties Between Israel and China Mushrooming

March 20, 2015

MIDEAST STREETS ™
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Linda Gradstein/The Media Line

Fiona Darmon, a partner at JVP, one of Israel’s most successful venture capital funds, was recently in China at a meeting with a large investor. She sat in his office for over an hour, chatting with him about everything but business. Only then, she says, did he nod to his subordinates, and Darmon was taken into another room, where the business discussions began.

“The mindset in China is that if we’re going to do business and I’m going to entrust you with my capital, let’s see if we have a personal rapport before I even move to the next step,” Darmon told The Media Line. “It’s about you as a person, first.”

Israelis are not known for their patience, and that can be a challenge, says Ilan Maor, a managing director of Sheng, BDO and a former Israeli consul in China. Yet economic ties are “booming”, he says.

“The most important aspects of the commercial cooperation are gradually moving from buying and selling toward the main pillars of the future of technology and investment,” Maor told The Media Line. “China is taking its place gradually as a strategic player in the Israeli market.”

As an example, the Chinese company Bright Star is on the verge of buying a majority stake in Tnuva, Israel’s iconic dairy company. The company is so central to Israel’s image of itself that on leaving Israel, the last thing you see on the way to duty free is the logo of Tnuva’s cottage cheese container made out of flowers. If the sale goes through as expected, China and Israel’s kibbutz cooperative movement will share ownership of the dairy company.

More and more Chinese business people are visiting Israel looking to invest and to learn from Israel’s entrepreneurs.

“Israel is not only the “start-up nation,” it is also the “innovation nation”, Xueling Cao, Director of the Shengjing Group, who is currently in Israel, told The Media Line. “China is a huge consumer market, and Israel is a huge source of innovation and technology and we can match the two together.”

She is in China for a global innovation competition with a one million dollar prize. Applicants from Israel, China, the US, Europe and Latin America will compete. She said her group represents 10,000 Chinese companies, most of which have a valuation of at least a million dollars.

“Many of these companies would like to enter the Israeli market but they just don’t know how,” she said. “We help find Israeli partners for the companies and we advise them.”

The total trade between Israel and China is about $8.5 million dollars last year, says Maor. About one-third of that is Israeli exports to China, and two-thirds imports of goods and capital. China, with its population of 1.2 billion and tiny Israel, with just over 8 million, seem like unlikely partners. But they make a good pair.

“We have innovation and they have market size,” Aurora Carlson, the head of Asia Investor Relations for Our Crowd told The Media Line. “They have a lot of liquid cash and we have successful startups.”

Chinese admire Israelis, says Xueling Cao, and the two business climates have some similarities.

“China and Israel are the only place where it’s not rude to ask someone how much money they make,” Ilan Maor says. “At the same time, Chinese are much more patient and like to move slower. It can take time to develop relationships.”

Most of his business dealings, he says, are done with friends or friends of friends, many of whom he has known for years. He cautions Israeli companies against trying to move too fast. At the same time, he says, Chinese are very friendly and enthusiastic and want to learn more about Israel and Israelis.

One market that has still not been developed is the Chinese tourism market. Only about 40,000 Chinese visit Israel each year. As business ties increase, tourism is expected to as well.

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