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U.S.’ Loss is Israel’s Gain, How China is Finding New Sources of Technology

· China,Israel,Economics,Economic Trends

U.S.’ Loss is Israel’s Gain, How China is Finding New Sources of Technology

Recent developments in the trade war between the United States and China have created economic opportunities for other countries. As a result of the increased tariffs and trade restrictions imposed by the United States, China’s export volumes to the United States fell 9.7% in the first four months of 2019.

Similarly, direct investment by Chinese companies in the United States has fallen 10% compared to 2018. Consequently, Chinese firms have begun to look for more opportunities to invest in foreign technology. One such beneficiary is Israel, where a large number of Artificial Intelligence (AI) companies and other tech startups have products similar to those in the United States.

A recent tech conference hosted by Beijing’s government targeted Israel’s business community. The Zhongguancun AI Industry Application and Development Forum had two Israeli AI firms present, Gauzy, a smart glass company, and Stratasys, a 3-D printing group. 17% of all Israeli startups in 2017 were AI related, making Israel an attractive country for Chinese investment. Trax Image Recognition, a computer vision technology company with ties to Israel, recently acquired a $125 million investment from one of China’s largest investment firms, Boyu Capital.

Trade between Israel and China grew 30% in the first half of 2018 compared to the same period in 2017, and has since shown no signs of slowing. Because Israel holds an 11% market share of all AI solutions in the world, good for third overall, it can be expected that relationships between Chinese and Israeli companies will only continue to grow. Furthermore, AI startups in Israel have raised $2 billion since 2017, and have shown a welcoming attitude toward foreign investment.

Relationships between companies from Israel and China are not without concern, however. China has shown a tendency to steal intellectual property, and may continue these actions as they try to catch up to the AI capabilities of the United States. The U.S. government has put pressure on Israel to end relationships with Chinese companies in order to protect national security. These warnings, however, have yet to slow investments by Chinese firms, suggesting that Israeli AI startups may be wise investments as they continue to grow and be sold.

Written by Gib Versfeld & Edited by Themis Pappas & Alexander Fleiss

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