China’s Investments in Israel Reflect its Grand Strategy

China’s rapprochement with geopolitically strategic Israel is a result of Beijing’s aims to enhance its reputation while weakening the US’s alliances.
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 In recent years, China has dramatically increased its investments in Israel. Bilateral trade between the countries peaked at $15.3 billion in 2018 from $51.5 million in 1992. Chinese companies signed 87 investment and five construction business deals with Israel between 2011 and 2018, and 54 of those investments are in the technology sector. Chinese investment in Israel’s tech sector exceeded $325 million in 2018. Chinese investments appear to be a palpable effort to improve both economic and diplomatic relations with Israel. Two primary strategic considerations drive China’s engagement in Israel.


 First, China views its relations with Israel as a part of its larger Middle East policy, which refers to undermining the longstanding US-Israel alliance. Second, Israel is an important country for China’s Belt and Road Initiative (BRI) in terms of its geostrategic position. These two foci mirror China’s grand strategy as of late, namely, the weakening of US hegemony in regional and global contexts so as to minimize Washington’s containment approach towards China while at the same time improving China’s image in international politics. Indeed, China’s policies in the Middle East have always corresponded to larger trends within the realm of its foreign affairs.

China-Israel-US Triad: the Grand Strategy of China as a Rising Power

China has gradually increased its engagement in world politics since the reform era began in 1978, and even more so throughout and following the 1990s. Along with the consensus of China’s role as a “rising power” in global politics come discussions of the nature of its grand strategy. Many argue that China pursues a “counterhegemonic” grand strategy, which refers to its attempts to weaken US hegemony without “overturn[ing] the existing international order” while cultivating “greater influence and a more positive international environment” for China.

China’s developing relations with Israel mirror its global strategy. By strengthening its ties with Israel, China intends to weaken the US-Israel alliance and US influence in the Middle East. Additionally, Israel’s geostrategic position within the BRI serves China’s broader aim of cultivating a positive image as an international purveyor of economic, environmental, and infrastructural opportunity.

Chinese Interest in Israel: the Regional Trajectory

Until the early 2000s, China’s relations with Israel mainly revolved around economic cooperation. Later, the main interest of China in Israel extended to defense technologies. In the words of Israeli Prime Minister Benjamin Netanyahu, China is interested in “three things: Israeli technology, Israeli technology, and Israeli technology.”

China’s defense technology transfers from Israel include “technology to upgrade Chinese tanks, night vision systems, electronic warfare systems, Python-3 air-to-air missiles, fighter aircraft technology, and unmanned aerial vehicle (UAV) technology.” It is also reported that China has increased its investment in Israel tenfold between 2016 and 2017, mainly in the fields of technology and commerce.

China has used these large investments as leverage in pursuing it self-interest while simultaneously chipping away at US-Israeli relations. For instance, Israel sided with China by becoming a founding member of the Asian Infrastructure Investment Bank (AIIB), despite objections from the US. The US has been concerned about these developments and has often attempted to prevent Israel from developing strong relationships with China, particularly when it comes to military technology transfers.

Two prominent examples illustrate how the US has interfered in Sino-Israeli cooperation. The first case happened in the 2000s when the US pressured Israel to cancel its deal with China on the installment of PHALCON advanced airborne radar systems on surveillance planes for the PLA Air Force. The second instance saw the US impede upgrades of UAVs sold to China by Israel. Indeed, Israel sold Harpy UAVs to China in the 1990s and secretly continued to upgrade them. In 2004, the US realized that China sent some UAVs to Israel for upgrading and protested. This situation led to a crisis between the US and Israel, with the US imposing sanctions on Israel by suspending cooperation on several projects and freezing the delivery of night-vision equipment. Viewed as a betrayal of Israel by the US National Security Council, these examples demonstrate that China’s defense behavior has harmed the US-Israel alliance.

China has also been known to use its leverage to polish its international reputation. It is reported that China asked Israel to refrain from testifying in the New York court case accusing state-owned Bank of China of laundering Iranian money to finance Hamas and Palestinian Islamic Jihad. After this request, the case was dismissed.  China’s influence illustrated here piques US anxieties.

Global Projection with the Belt and Road Initiative

The BRI cannot be examined independently from China’s grand strategy. Indeed, the aim of the Initiative is not only to solve China’s domestic economic problems but also to endorse Chinese influence in the international arena by weakening US dominance and its containing policy towards China. Chinese President Xi Jinping has clearly stated that the Middle East is an intrinsic part of this Initiative.

Figure 1. Israel’s Geostrategic Location for the BRI

In this context, Israel is vital for the BRI in two ways. First, Israel can improve the Initiative with “transportation and logistics technologies,” especially when considering that the project requires railways, logistic centers, systems for trains, and aircrafts. Second, Israel occupies a strategic position that connects the Mediterranean Sea and the Indian Ocean through its ports: Eilat on the Red Sea and Ashdod and Haifa on the Mediterranean (Figure 2). Thanks to its geostrategic location, Israel is an essential transportation hub and economic corridor between Asia and Europe (Figure 1), and therefore attracts Chinese investment.

Figure 2. Israeli Ports

Israel’s ports are of particular importance in this context. Here, the state-owned Chinese Shanghai International Port Group (SIPG) won a 25-year contract to operate at Haifa Port in 2015, while another Chinese state-owned company, China Harbour Engineering Company (CHEC), won the international tender to construct two new private ports in Ashdod. Because Chinese infrastructure projects also benefit Israel by providing low-cost and efficient access to the rapidly growing Chinese market, Israel turns a blind eye to US concerns from time to time.

For instance, following Chinese involvement in Haifa Port, it will no longer base the Sixth Fleet of the US Navy. As a result, the Israeli Navy “will not be able to count on maintaining the close relations it has had with the Sixth Fleet.” For Former U.S. ambassador to Israel Dan Shapiro, the operation of a Chinese company at Haifa Port “poses a significant challenge and maybe a risk for U.S. Navy operations.”

The BRI also seeks to better China’s image in the international arena. Israel’s cooperation in facilitating BRI routes to Europe opens new doors for China. Such routes to Europe would increase trade and economic integration between China and European countries. Consequently, China could exert influence over certain European countries, thereby paving over its controversial activities in the South China Sea or its domestic violations of human rights, for example.

In the end, China’s targeting of US-Israeli relations and its utilization of Israel’s geostrategic position for the BRI portend profound impacts on regional and international political balances. They reflect China’s grand strategy as a rising power, namely, to weaken US hegemony and improve China’s reputation on the global stage.