China has a long-held reputation in the international community for being closed off from outsiders — a reputation that it cultivated for thousands of years. In recent decades, however, this past custom has rapidly been changing and China has become a world leader in manufacturing and production, leveraging a large population and an immense technological skill base. Today China is pushing for more growth, looking to drive innovation to launch its economy into the future. This has led to a trend of opening up to the world, and in keeping with that trend, China has begun to reach out to Israel.

Today Israel is only the third country with which China has developed a multi-visit visa program to encourage business and tourist travel. This highlights the importance of Israel’s role as an innovation center for new technologies, particularly in the fields of Agrotech, Healthcare, Fintech and cyber security, and China’s desire to strengthen its cooperation with Israeli technology companies.

In March, Prime Minister Benjamin Netanyahu and Chinese Vice Premier Liu Yandong announced that Israel and China were starting negotiations for a bilateral free trade agreement. A free-trade agreement between Israel and China may not only increase the gross national product of both countries, but also would most likely double the total value of traded goods between both countries, which currently stands at $8 billion.

Challenges to Navigate

The two countries have much to offer each other, and the ability of Israeli companies to offer technological solutions which are applicable to the needs of the Chinese market is of significant interest to the Chinese government and Chinese investors and companies.

Despite the many advantages which such cooperation can yield to both countries, there are many obstacles which hinder the cooperation between the two countries, such as cultural gaps which have a material effect on negotiations and the ability to locate a strategic partner on the other side, as well as differences in each party’s expectations with regard to a given transaction. Whereas many Israeli entrepreneurs and companies set their companies up for future exits, Chinese investors are in search for technologies that could benefit the Chinese market and therefore are looking for long term projects that are not necessarily focused solely on their return on investment.

In addition, another challenge which is inherent to Israel- China collaborations is the need to be familiar with Chinese laws and regulations and the ability to navigate the heavy bureaucracy which is associated with operating in China. In order to overcome the above challenges it is highly recommended to receive counsel from professionals who possess the know-how which in bridges the cultural and legal gaps between the parties, and who can advise on certain material issues which are synonymous with doing business in China, such as proper tax structures, or expatriating funds which were generated in China.