Op Eds & Articles
China is emerging as a new land of opportunity amidst the floodwaters of the global economic crisis.
Buoyed by strong fundamentals and sound management, China appears to be weathering the crisis better than most. As world economies are set to contract, China’s will continue to grow at an annual rate of 6.8 percent according to the latest forecast of the World Bank. China would like to see this figure improve. Analysts point to an 8 percent target growth rate for future years.
The Chinese government is poised to disburse some ¥4 trillion of its reserves to reach its target growth rate.
China’s massive economic stimulus package provides hope – not only for the Chinese economy, but for enterprising foreigners as well. With expertise in key areas of interest for the Chinese, Israelis are positioned to participate constructively in China’s economic recovery.
Chinese Plans for Economic Stimulus
Beijing plans with provincial and municipal Chinese governments to pump close to ¥4 trillion in the coming years into national rural infrastructures and to stimulate domestic consumer growth as the turn-around driver of its slowed economy.
The money will be channeled into new and existing transportation projects. These include 90 new airports, electric power and railway lines and freeways connecting rural areas from Sichuan to Xinjiang provinces. The projects aim to boost the economies of central and western China, to develop their natural resources and to bring political calm to the region’s 60 million Chinese Muslims.
The Chinese stimulus plan also offers investment incentives focusing on education and communication through hi-tech innovation in cooperation with local universities, start-up hi-tech parks and Internet expansion through TV networks. Other sectors include environmental issues, specifically polluted and waste water treatment installations, as well as intensive agriculture-related conservation technologies such as smart (drip) irrigation and new fertilizers to boost land yields and enhance the quality of their produce.
Health care facilities and mobile hospitals are also targeted for construction throughout central and northern China.
These sectors of the Chinese economy all offer Israeli businesses excellent investment opportunities.
New Israeli entrants to the Chinese economy
China-Israel Value Capital (CIVC) equity fund and Infinity Private Equity Fund are both Israeli ventures that wish to capitalize on China’s massive growth potential.
Israel is considered second to the United States in software development, internet and alternative energy applications, telecommunications, water treatment, biopharmaceuticals and medical technology, says Ami Dotan, a Beijing-based general partner with China-Israel Value Capital (CIVC) equity fund.
CICV funds growth-stage Chinese companies whose sales are mostly focused on mainland Chinese markets They hope to get a piece of the growing demand in tenders generated by the stimulus plan for projects which are also, but not exclusively, government-funded. CIVC’s Dotan notes that Israelis have experience in the areas that China is currently developing.
China is “greenfield” for Amir Gal-Or, the Hong Kong based founding manager and partner of Infinity Private Equity Fund (Tel Aviv). Infinity ties local Chinese start-up companies around Israeli technologies. It plans to shift from information technologies (IT) to more resilient life science investments such as the telemedicine provider China Medicine On-Line Ltd. “You’d have more competition in the US,” Gal-Or recently told The Wall Street Journal. “Culture-wise, you are not competing with the Chinese. You are adding value. Either you bring the experts or the Initial Plan or the strategic partnerships.”
Li Yaoting, the foreign affairs coordinator for Jinan Municipal Government in Shandong Province, confirms that Israeli companies should apply their hi-tech expertise in IT, metallurgy, machinery and chemical industries to China’s newly focused infrastructure development projects and facilities constructions.
Jinan’s steel industry could especially benefit from Israeli steel manufacturing know-how, said Li, who was in Israel in March with a delegation from his city to promote opportunities for further economic, commercial, educational, cultural and sporting partnerships with the Israeli city of Kfar Saba with which Jinan (a city of six million residents) is formally twinned.
Israeli pragmatism and conceptual flexibility
The Israeli mix of good, practical technology and pragmatic managers and entrepreneurs is highly rated in China says Ornit Avidar, a former Israeli commercial attaché in Hong Kong and Israel-based partner with CIVC equity fund. Israelis have always had “a very open and conceptually flexible approach” allowing changes, which depart from the original Israeli model to be integrated at China’s request, she says. This has given them a qualitative edge over their American and European competitors.
Chinese and Israelis think similarly and this can account for 70 per cent of a good business relationship, says Avidar. The ‘cultural phenomenon’ has been confirmed to her by some Chinese who claim that they “speak on the same wavelength as Israelis.”
She advises Israeli first timers seeking to break into the Chinese market to learn Chinese business culture and practice, warning that the ignorant can unknowingly offend the other side. When that happens, second chances to repair the damage are rarely given.
“You can’t unthinkingly plunge into Chinese business. Do your homework first. Read and clue up, make pilot visits to see the opportunities and become aware of the different facets. Take business courses and talk to people who have done business in China and learn from their mistakes. Attend social networking forums and seminars sponsored by different promotional organizations like the Israel Export and International Cooperation Institute.”
This involves a sizeable initial outlay in time and money, but is absolutely necessary, stresses Avidar.
The recently formed Israel-China Chamber of Commerce in Beijing held a seminar in March attended by several dozen participants to evaluate the Chinese government stimulus plan. The discussion was led with presentations by Zhang Liquin, a senior fellow in the Department of Macroeconomic Research at the State Council Development and Research Center and China economic analyst Arthur R. Kroeber of Dragonomics Consulting. Representatives of leading Chinese industries later shared personal experiences on ways of responding to uncertain markets.
Israeli technology, adaptable know-how and expertise is well placed for Israeli business and investment to reap the new horizons presented by China’s economic stimulus plan which guarantees a continuing high rate of annual growth and exciting opportunities to tap into China’s undeveloped resources.
Transforming a crisis into an opportunity
Shanghai-based Israeli-American attorney Amit Ben-Yehoshua, a specialist in Chinese law and Partner in Shibolet & Co. Advocates & Notaries, sees the current crisis as an opportunity.
“The Chinese commonly say that in any crisis one can find an opportunity. The word ‘crisis’ in Chinese (wei ji 危机) consists of the character ‘wei’ (危) which means ‘risk’ and ‘ji'(机) which stands for ‘opportunity’.”
He believes that local governments in China will be more willing to approve foreign investment projects because of the economic downturn.
“I predict that it will be easier to receive approval for an investment with less minimum registered capital. Moreover, I know that several local governments agreed to extend the time and to allow the investors additional time prior to injection of additional equity into the company notwithstanding the mandatory legal requirements according to the Chinese Company Law.”
With China as Israel’s second largest importer, he insists that the question today is not whether to invest in China, but rather what is the wisest way to invest.
—
Yehonathan Tommer is an Israeli correspondent who writes on Mideast affairs for media in Australia, Asia and Canada.
Back