Netanyahu Seeks China Waiver on Israel Technology Investments

  • Israeli leader wants exemption from currency restrictions
  • Official estimates agreements during visit at $2 billion

Israeli Prime Minister Benjamin Netanyahu proposed an agreement with China that would enable his country’s technology companies to raise money from Chinese investors without tripping over new currency restrictions imposed by Beijing.

Netanyahu wrapped up a visit to China on Wednesday after asking President Xi Jinping to make Israel an exception to restrictions on the overseas use of the yuan that have limited Chinese investments around the world since late last year. A senior Israeli official, speaking on condition of anonymity to discuss confidential details, said 25 agreements the two governments and companies signed during Netanyahu’s visit were worth an estimated $2 billion.

“I asked for an exemption on the general restrictions,” Netanyahu told reporters late Tuesday after dining with Xi at the Diaoyutai State Guesthouse. He told the Chinese leader that a waiver for his country would be “marginal for China but it can be very significant, not just for us but also for their technology acquisitions.”

According to Netanyahu, Xi said he was willing to do it. Asked to comment, a spokesman for China’s Foreign Ministry replied in a fax that the country “supports domestic enterprises’ appropriate and legal investment activities overseas. We encourage capable, reputable enterprises to invest overseas and welcome Israel’s innovative technology companies to cooperate in China.”

Hobbling Deals

Officials in Beijing face a balancing act in trying to alleviate pressure on the currency by limiting outflows without extinguishing the influence of domestic companies internationally. Chinese executives say the measures have derailed expansion abroad and hurt their country’s economic ambitions.

While one-third of foreign investment in Israel last year came from China, according to Netanyahu, Israeli startup executives said deals have fallen through because Chinese investors couldn’t take money out of their country.

The currency restrictions are “a major setback to our effort to bring Israeli technology to China and to bring Chinese capital into Israel,” said Yigal Livne, managing partner of Oriental Fortune Capital Co., an investment fund based in Herzliya, Israel, and Shenzhen, China. Livne said he knows of at least six deals that have foundered as a result.

Because of the new policy, “people are sitting on the fence,’’ added Yoav Sade, head of the China practice at the Israeli law firm Meitar Liquornik Geva Leshem Tal, who was part of Netanyahu’s delegation.

The Chinese currency’s exchange rate has stabilized against the dollar under the seven-yuan mark since authorities stepped up capital control measures in November. Outflow of foreign currency dropped in the first two months of 2017, enabling a slight gain in February after dropping for seven months, according to data compiled by Bloomberg.

Joint Ventures

Xi and Deputy Premier Liu Yandong both met with Netanyahu on Tuesday, announcing steps to encourage joint ventures, particularly in desalination and health-care databases. Xi praised Israel as a “world-renowned innovative country” and said “pushing forward innovation-driven development” is a “priority for our cooperation.’’

The premier also met with Robin Li, the billionaire chairman of Chinese internet search company Baidu Inc., who’s invested in four Israeli startups and said he’s scouting for more.

Israeli cabinet ministers traveling with Netanyahu also signed a series of agreements with China, ranging from granting visas for 20,000 Chinese construction workers to opening joint research centers in both countries to develop applications for artificial intelligence technology.

Netanyahu’s visit to China was overshadowed in Israel by his threat to dissolve his government for a fourth time in a dispute with coalition partners over the future of Israel’s public broadcasting authority. The 67-year-old leader refused to address the political storm at home and whether it will lead to new elections.

— With assistance by Ran Li, and Peter Martin

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