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Israel to increase reviews of foreign investments after U.S. pressure to limit China

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Illustration: Gabriella Turrisi/Axios

Israel’s Security Cabinet reached a decision earlier this month that significantly tightens government oversight on foreign investments, two senior Israeli officials say.

Why it matters: While the decision doesn’t explicitly mention China, Israeli officials say the new policy is a response to two years of pressure by the Biden administration to limit China’s role in sectors like energy, infrastructure, telecommunications and transportation. 

  • The Foreign Investment Review Committee will review all investments that amount to more than 20% of the value of companies in a broad range of sectors and more than 5% in cases of particular relevance to national security. All foreign investments in government tenders will also be reviewed.
  • The Cabinet left it up to government regulators to determine which companies fall into each category, in consultation with the committee.
  • According to the decision, the status of the Foreign Ministry on the committee will be upgraded from observer to a full member, giving greater importance to foreign policy considerations.
  • This is a significant change of policy for the review committee, which was formed three years ago after pressure from the Trump administration. Until now, the review process was mostly voluntary and it intervened only in rare cases.

Yes, but: The rule won’t apply to foreign investments in private Israeli tech companies, the two Israeli officials say.

  • The Israeli government has expressed concerns that such reviews could harm the Israeli tech sector, which is the main engine of the Israeli economy.

Flashback: The Biden administration has put a lot of pressure on the Israeli government to limit Chinese involvement in the Israeli economy.

  • U.S. officials have expressed security and economic concerns about Chinese investments in Israeli infrastructure but also in its tech sector and involvement in research at Israeli universities.

The other side: Two weeks ago, Chinese special envoy for the Middle East Zhai Jun visited Jerusalem and told Israeli Foreign Ministry officials that China hopes “external elements” won’t interfere with the relations between the countries, Israeli officials said.

  • According to a summary of the meeting, the Chinese envoy stressed that China hopes it can enjoy “open, equal and non-discriminatory” treatment in Israel. 

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