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Israel to set up investment watchdog after US raises concerns over China

Under US pressure, Israeli's security cabinet will establish new advisory body, but companies won't be required to consult it
In Haifa, Chinese company SIPG recently signed a 25-year contract to build and operate a large shipping seaport (AFP)

Israel will set up a new watchdog to regulate foreign investment in the country following sustained pressure from the US over concerns with China's rising power in the world.

Israel's security cabinet announced plans to establish the new body on Wednesday, which came after a visit from US Treasury Secretary Steve Mnuchin to Israel earlier this week.

The body will be overseen by the Foreign Ministry and will vet businesses that are critical to the economy or national security, including telecoms companies and arm makers, Haaretz reported. 

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While the watchdog will ostensibly screen all foreign investment, it is understood that it has been set up to appease American concerns over Chinese access to US military technology used by Israeli security forces, the country's cybersecurity sector, and the data of US citizens.

Companies, however, will not be required to consult with the body which will only have advisory powers.

It is scheduled to start consultations in January 2020, but given that the next Israeli government is not beholden to decisions made by the current interim government, it is unclear whether the body will move forward.

Growing ties 

China is rapidly becoming a major trading partner with Israel. Since diplomatic relations between the two countries were established in 1992, Israeli exports to China have increased to nearly $4bn with imports from China exceeding $6bn in 2017.

The Israeli high-tech sector is especially dependent on Chinese investment, which is not looked at favourably from the White House, as it has been locked in a trade war with China for the past 16 months. 

In April, when US President Donald Trump recognised Israel's sovereignty over the Golan Heights, he told Netanyahu to temper Israel's ties with China, Israel's Channel 13 reported at the time.

While Mnuchin's visit unfolded, the Viola Group, the Herzilya-based private equity group focused on technology, announced on Monday that it received a $250m investment from the China Investment Corporation (CIC) to establish a fund to develop Israeli products for the Chinese market.

In June, the Israeli city of Haifa defied US pressure and signed a 25-year contract with the Chinese company SIPG to build and operate a large shipping seaport in the city.

US authorities expressed concern that the Chinese company would be operating close to where US naval ships dock and could potentially collect intelligence, but the contract moved forward anyway.