Chinese Investment in Israeli Technology and Infrastructure

Security Implications for Israel and the United States

by Shira Efron, Karen Schwindt, Emily Haskel

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Research Questions

  1. What is the nature of Chinese investment in Israeli technology and infrastructure?
  2. What are the security implications of Chinese investments in Israeli technology and infrastructure?
  3. What aspects of Chinese investment into Israel merit further investigation and research?

Relations between China and Israel have expanded rapidly since the early 2000s in numerous areas, including diplomacy, trade, investment, construction, educational partnerships, scientific cooperation, and tourism. Israel seeks to expand its diplomatic, economic, and strategic ties with the world's fastest-growing major economy and diversify its export markets and investments. China seeks Israel's advanced technology and values Israel's location as part of the Belt and Road Initiative. Chinese investments in Israel have grown substantially and include investments in high-tech companies that produce sensitive technologies as well as the construction and operation of key infrastructure projects. Chinese investment in sensitive technologies and construction of major Israeli infrastructure projects present distinct concerns for Israel and the United States. The authors examine the extent and nature of Chinese investments in Israeli technology and infrastructure and discuss the security implications these pose for Israel and the United States. The primary concern regarding investment relates to Chinese ownership of companies that might possess sensitive technology or data; concerns over construction are focused on the use of infrastructure projects to further Chinese foreign policy goals. The operation of infrastructure projects affords China unique surveillance opportunities and possibly economic and political levers of influence. The report concludes with a set of open-ended questions that merit further investigation to better understand the magnitude of risks associated with Chinese investment in the Israeli market.

Key Findings

Security risks exist for both Israel and the United States

  • Investments by Chinese companies' links to the Chinese government, the People's Liberation Army, and the Chinese Communist Party pose security risks.
  • Chinese investment and construction could lead to leaks of sensitive technology and cyberespionage.
  • Chinese and Israeli interests in the Middle East are incompatible.
  • The security risks of Chinese investment and construction could affect the Israel-U.S. relationship.

Recommendations

  • Data on Chinese investments in Israeli technology and infrastructure are not systematically collected, and more research is needed to capture the full extent of Chinese access.
  • Further investigation is needed into the question of what type of regulatory mechanism Israel is in the process of creating to monitor foreign investment and how effective it will likely be.
  • More research is needed into the nature of the threat to the United States posed by Chinese acquisition of sensitive technologies from U.S. allies, including, but not limited to, Israel.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    China's Outbound Investment Strategy

  • Chapter Three

    Foreign Investment and Regulatory Policies in Israel

  • Chapter Four

    Chinese Technology Investment and Construction in Israel

  • Chapter Five

    Security Risks for Israel and the United States

  • Chapter Six

    Concluding Thoughts and Research Gaps for Further Study

  • Appendix A

    Chinese Investments in Israel

This research was sponsored by the Office of the Secretary of Defense and conducted within the Cyber and Intelligence Policy Center of the RAND National Defense Research Institute (NDRI).

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