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Israel Using E=Mc2 Knows All About Branding When Seeking China's Business

Israel’s formula for boosting trade to China is to hang at the Expo Museum in Shanghai. It’s E=mc2, the Albert Einstein discovery that the government uses to symbolize the virtues of its technology companies.

Finance Minister Yuval Steinitz brought a reproduction of Einstein’s Theory of Relativity, the original of which is at the Hebrew University of Jerusalem, when he visited the Shanghai Expo in May. The Shanghai authorities requested the copy for their museum.

“The manuscript will maintain the image of Israel, a country that exports to China, as a center of innovation,” Consul Jackie Eldan said in a phone interview. “This gift translates into guan xi, which is important to the Chinese and means good contacts, good relationships.”

Israel is looking to Asia as growth in the U.S. and European Union remains relatively slow. Exports to Asia climbed by more than 50 percent in the first 10 months of 2010 compared with the same period a year ago, almost double the pace for Europe and quadruple the pace for the U.S., the Jerusalem-based Central Bureau of Statistics said Nov. 17. Exports make up about 40 percent of Israel’s gross domestic product, which was 395 billion shekels ($110 billion) in the first half of 2010.

Israeli companies need to expand sales beyond a home market that has a population of only 7.7 million. Many of Israel’s neighbors, such as Lebanon and Syria, remain technically at war with the Jewish state.

About 60 percent of goods are sold to the U.S. and Europe while 20 percent go to Asia, the Bank of Israel said in a September report.

Water Purification

“Our exporters have to be searching for markets in a growing part of the world which is obviously Asia, obviously the two giant economies in Asia,” Bank of Israel Governor Stanley Fischer said on a conference call with reporters on Nov. 15.

Petach Tikva-based Strauss Group Ltd., Israel’s biggest food company, announced in October that a unit had agreed to market water-purification products in China. Nice Systems Ltd., a maker of digital recording and analysis systems, said in May that it would provide a security system to India’s parliament.

The Ra’anana, Israel-based company’s exports to the Asia- Pacific region rose to $53.5 million in the first three quarters of 2010 from $48 million in the same period in 2009.

In business meetings, “the Chinese thought we had an advantage by being Israelis and they mentioned Albert Einstein,” said Nice Chief Executive Officer Zeev Bregman, who started selling Israeli technology in China with a different company in the early 1990s. “The Albert Einstein brand belongs to the state of Israel, you know,” he said with a smile.

Einstein Centers

Steinitz pledged during his visit to set up so-called Einstein Centers across China to provide services, information and a physical base for Israeli companies doing business there. Israel claims Einstein in part because more than 43,000 records from the physicist whose work paved the way for the nuclear era are housed at the university in Jerusalem.

The German-born Einstein, who became a naturalized American citizen, was offered the presidency of Israel in 1952 by Premier David Ben-Gurion. He declined.

The government is weighing spending more on trade promotion activities in India and China, said Boaz Hirsch, deputy director general for foreign trade in Israel’s Ministry of Industry, Trade and Labor. Negotiations for a free-trade agreement with India are underway, and a government committee, appointed by Prime Minister Benjamin Netanyahu, is considering ways to boost exports to China.

China Trips

Steinitz was joined by Environment Minister Gilad Erdan on his China visit; Industry, Trade and Labor Minister Binyamin Ben-Eliezer made his own trip subsequently. Netanyahu’s office said last month he plans to visit China, though no date has been announced.

Still, Israel began its serious push into Asia only after the global financial crisis, said Eli Bitan, head of Tel Aviv- based Bank Hapoalim Ltd.’s Hong Kong office.

Israelis “have been focused on one type of customer over the last years, which is the U.S., and clearly they have to change their mindset,” he said.

Israel has very close technology ties with the U.S. after years of doing business there, said Hirsch.

“If you look at the Israeli high-tech sector, many studied in the U.S., worked in the U.S., went public in the U.S,” he said. “This is a whole infrastructure layer that we don’t have in Asia and have to compensate for.”

Military Use?

Israel must also be careful when selling technologies that might have a military use to avoid upsetting the U.S., said Steven Popper, a senior economist at the Santa Monica, California-based Rand Corp.

“If Israelis are in a position to sell to the Chinese technologies that the U.S. government and the U.S. military consider to be particularly sensitive, they certainly run the risk of harming relationships they have cultivated with the U.S. and consider to be important,” Popper said by phone.

China increasingly sees Israel as a different avenue to gain access to the newest technologies, said Nicolas Pechet, managing director of the Global Intelligence Alliance Group, Shanghai. GIA is a global strategic advisory firm based in Helsinki.

He cited clean energy as an area with potential.

“China now faces massive challenges with this so it’s a match made in heaven for Israeli companies and the Chinese,” he said in a phone interview. “We’ll see huge growth in trade between Israel and China in these segments in coming years.”

To contact the reporters on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net Gwen Ackerman at gackerman@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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