A small nation exceeding only 8.5 million people, Israel is a world leader in technology and innovation, consistently producing an impressive number of tech startups. From drone technology and ride sharing applications, to unique online shopping platforms and breakthrough technologies in the life science field, Israel’s tech companies cover a myriad of fields. It therefore comes as no surprise that Chinese investors are eager to delve into the countless possibilities stemming from the advancement of Israeli tech companies.
In 2015, Chinese investments in Israeli startups exceeded USD 500 million, unveiling a growth of more than 300 percent from 2012.
More Opportunities to Meet Chinese Investors
Throughout 2016, a number of significant conferences helped introduce prospective Chinese investors to Israeli tech companies. In January 2016, Beijing hosted the China-Israel Innovation Summit, which hundreds of Chinese investors attended. The investors aimed to meet various Israeli tech companies, with the potential for large investments. The Summit thus acted as a mediator between Chinese investors and Israeli tech companies.
In recent years, both Tel Aviv and Shanghai have hosted conferences where Israeli high-tech companies presented their ideas to Chinese investors. Various investor companies, among them Alibaba, Baidu, Lenovo, SAIF Partners, GF Xinde, and many more, were present. One of the partners to these conferences was the China-Israel Changzhou Innovation Park, a bi-national government initiative. It has become a tech-hub for large Israeli tech companies to use as a means for penetrating the Chinese market.
Chinese Investments – What Are They Looking For?
In recent years, Chinese investors have shown specific interest in the fields of life science, pharma, medical devices, agrotech, fintech, and e-commerce.
Prominent examples of Chinese investments in these fields include, inter alia, the sale of cCam Biotherapeutics for approx. USD 605 million and the acquisition by ChemChina of Adama Agriculture Solutions (and its subsequent sale to a fully owned subsidiary, Hubei Sanonda Co. Ltd.).
In addition to various Chinese investments in Israeli companies, China has reaped the benefits of Israeli companies operating in China. For example, Israeli-Chinese private equity firm Infinity Group and Neusoft Corporation have approved the establishment of a USD 250 million investment to back Israeli life science companies operating in China. Neusoft Corporation is China’s largest IT Corporation, holding a 50% share of the medical market in China. This fund will assist Israeli medical companies to connect with the Chinese market through the integration of cloud-based platforms, as well as assist Israeli life science companies with regulatory approvals and product promotion in China.
Furthermore, Israeli entrepreneurs are highly sought after in China, predominantly in the fields of mobile and web technologies, gaming, cleantech, agrotech, and digital health. These fields all go hand in hand with Israeli high-tech expertise.
Challenges
As with any cross-border investment, Chinese investors must deal with the challenges of investing in Israeli companies. Aside from the language barrier, the differences between the Israeli and Chinese cultures have been a challenging stepping stone for Chinese investors. For example, within Israeli culture, companies prefer transactions to be quick and efficient, while Chinese companies are patient with a more tolerant approach. In addition, there are numerous rules and regulations in China, while Israeli companies strive for instantaneous completion of contracts and agreements. This bridge is a test to the relationship between Chinese investors and Israeli tech companies.
Regardless of the challenges facing Chinese investors in Israeli tech companies, these increasing investments and acquisitions allow for limitless possibilities in relation to research, development, marketing, and expansion of the Israeli tech world. The evolving relationship between China and Israel demonstrates a promising future for Israeli companies and startups.
We have a proven track record for overseeing various investment transactions and cross-border deals. We provide comprehensive legal services to Israeli technology companies who wish to enter the Chinese market, as well as offer legal counsel to Chinese clients looking to initiate operations in Israel.
Source: barlaw.co.il