China, Israel, and the United States: Triangular Pressures

On December 31, 2018, JPPI Senior Fellow Dr. Shalom Wald discussed China – Israel relations, and their implications for US – Israel relations, in light of recent tensions between Washington and Beijing.

We were honored to be joined by JPPI’s co-chair, Amb. Dennis Ross, who offered comments along with JPPI Senior Fellows Amb. Avi Gil and Brig. Gen. (Res.) Michael Herzog.

The key point of agreement was that given the strategic and economic rivalry between the two “giants,” Israel must act more cautiously in its commercial ties with China, consider geopolitical concerns alongside economic ones, and make clear to the United States that it is doing so; and that the US stands to gain from positive Israel – China relations.

Dr. Shalom Wald’s Presentation:

  • China – Israel relations began to be influenced by US – China relations during the Korean War, and especially so as China grew into an economic and strategic rival to the US in the 2000s, and when Israel sought to export advanced arms and technologies to China. The US objected, including to arms that did not have American components.
  • Israel is the only country asked to sign a protocol according to which it has to submit all tech exports to China to US oversight.   This could limit its exports to China of dual use technologies. This has proven to be a source of tension between Jerusalem and Washington, as it is increasingly difficult to discern which technologies have dual use applications.
  • This has often been viewed by Israel as the price to pay for its strategic alliance with the United States, which is more important than economic relations with China. Israel further pays for this acquiescence through American companies taking advantage of this agreement to quash Israeli competition in Chinese markets.
  • As Chinese investments in Israeli technology and infrastructure continue to grow, they could become a serious point of contention between Israel and the US, with voices in the American and Israeli media   already voicing criticism of Israel.
  • These criticisms and tensions will only increase as the geopolitical and economic rivalry between the US and China increases. Conversely, Israel benefits from any reduction in tensions between the two countries. Dr. Wald noted a reportedly positive conversation that took place this past week between President Trump and Chinese President Xi Jinping. He observed a behavior pattern whereby Trump uses menacing rhetoric against his rivals, then manages to negotiate and reach some sort of middle ground through personal outreach, much as he did with North Korea.
  • According to Dr. Wald, Chinese investments and interest in the Israeli economy have grown steadily in recent years. According to the Economist’s China Going Global Investment Index Rating, Israel jumped from 31st place in 2013, to 17th in 2015 and 11th in 2017, a number that understates China’s interest in Israel as Israel is one of the few countries outside of China’s traditional orbit ranked so highly on this list. It is important to recognize that China views all economic activity as geostrategic, and such activity is coordinated by the regime with a long-term strategy in mind. Dr. Wald added that the Chinese have an admiration for the Jewish people’s contribution to creativity and science, and sometimes that they do not differentiate between Israel and non-Israeli Jews.
  • According to Dr. Wald, the conflict between Israel and the Arabs does not really interest China nor does the Palestinian issue. The Chinese are primarily interested in Israel as America’s closest ally in the Middle East and also due to its technological innovation and in Iran as America’s most resolute enemy and also as a nearby energy supplier.
  • Dr. Wald noted  articles in the American media invoking the slur of “double loyalty”: Israel betraying America The various articles reviewed focused on three main issues: 1) Israel’s technological exports will increase China’s military and economic power against the US; 2) Israel risks allowing its national infrastructure to fall under Chinese control; 3) Israel will inadvertently allow China to spy on the US navy, as it docks occasionally in Haifa port. It seems that Israel is being judged more harshly than other countries with similar Chinese infrastructure projects, perhaps since it is an emotional issue in American politics and since it is arguably more dependent on America than most other allies.
  • Dr. Wald noted a nativist trend in Israel regarding potential Chinese investment and claims that Western companies would not stir the same public sentiments. Indeed, Israel has blocked a number of deals offered by China, such as the acquisition of a major Israeli pension fund.
  • Dr. Wald offered three main policy recommendations for Israeli leaders:
    1. Israeli must demonstrate to the US that strong Israel – China ties are not adversarial or counter to American interests. On the contrary, these can also serve US interests. This should be Israel’s top priority.
    2. Israel must invest more in long term planning, and policy coordination regarding China than it currently does. Related to this is the lack of experts in Israel on China, although there is an excellent Israeli NGO strengthening links with Chinese think tanks and universities and a few other experts. That is, while China invests considerable resources in understanding Israel and any country in which it invests.
    3. Israel should consider what more it can ask and get from China beyond investments, such as an active and stabilizing role in Middle East affairs. One example offered would be to assist in the reconstruction (and oversight) of Gaza.  However, he suggested Israeli leaders, in their meetings with Chinese officials, stop “lecturing” them on the threat of Iran or other such regional issues, as they are not concerned with these.

Remarks by Amb. Ross:

  • The US sees China as a rising and increasingly determined power, no longer regional but global, seeking to challenge American dominance. This development has a psychological effect in the US across the whole political spectrum.
  • Amb. Ross recommended Israel fully take this consideration into account when making decisions involving China, and also clarify to American counterparts that it understands the US’ sensitivity in this regard.
  • This does not mean Israel has to cease economic cooperation with China however, just to be far more cognizant of and sensitive to this matter. Israel must convince the US that its strong relations with china might be helpful in producing more stabilizing Chinese behavior in the Middle East – something is an American interest.
  • Amb. Ross noted that Israel could affect China’s thinking by explaining actions by Iran that could provoke Israeli military responses, precisely because Chinese economic interests in the region are threatened by conflict.  He noted that the threat of an Israeli military strike on Iran’s nuclear program was instrumental in convincing the Chinese to back sanctions on Iran.  Israel itself can make this point to affect Chinese Middle East policy.
  • In regard to the lack of expertise in Israel, Amb. Ross noted the extent of business-people with expertise on China and knowledge of the Chinese, with whom the government should consult.
  • Amb. Ross found Dr. Wald’s idea for Chinese investment and involvement in Gaza interesting but was dubious and asked what the Chinese would have to gain from such activity. Dr. Wald offered that it could raise Chinese prestige internationally.

Remarks by Amb. Gil:

  • Amb. Gil inquired as to potential for tensions and even military escalation between the US and China in the coming year. He noted the prospects for economic stagnation in China, which could lead to internal dissent, and suggested a scenario in which Beijing seeks to divert attention from domestic troubles by stoking nationalistic issues, such as taking aggressive action against American allies in the South China Sea. What would the Trump administration do in such a scenario?
  • In response, Dr. Wald noted that Western observer have since the end of the Mao era in regular intervals predicted severe economic troubles for China, maybe it will be true this time, maybe not.  Dr. Wald did not foresee a military conflict, as the two countries are far too interconnected economically to allow the situation to deteriorate to a military conflict. He further added that such a conflict would not be domestically popular in China. The Chinese do not hate America. In any case, the Chinese, he noted, have always proven adept at compromising in order to navigate and reduce tensions and conflict with the US.

Remarks by Brig. Gen. (res.) Michael Herzog:

  • Israel is in danger of being “squeezed between two the giants”, both politically and economically. On the one hand, the US is Israel’s closest and most important strategic ally. On the other hand, China is a global power important to Israel’s economy. He shared that recently, a senior figure in Washington conveyed a stern warning to him that Israel does not seem to comprehend the extent to which it is upsetting the Unites States by courting certain Chinese infrastructure investments and urged Israeli caution.
  • Gen. Herzog commended the Israeli government’s recent decision to establish a mechanism that will view such major foreign investments through a national security and geopolitical lens, and not solely through an economic one. Israel cannot risk its relations with the United States, thus it must navigate such relations cautiously. Herzog calls it essential for Israel to set up a “de-conflicting mechanism” with the United States on China-related policy issues. He agreed with Dr. Wald that there are no real China experts in Israeli decision-making circles.
  • It is interesting to follow Chinese reactions to American sanctions on Iran. Thus, while politically China objects to such economic pressure, major state-owned companies pulled their major infrastructure (energy sector) projects out of Iran so as to comply with the US sanctions.
  • Regarding US fears that China would use its port operation to spy on the 6th Fleet, he noted that such a threat is overblown. Israel will anyway address security concerns out of its own interest and China could just as easily spy on the US ships from a building overlooking the port, as well as anywhere else the fleet docks (particularly its main Mediterranean port, Naples).
  • Gen. Herzog concurred with Amb. Ross vis-a-vis a potential role for China in Gaza and expressed similar skepticism.