As the trade war between Washington and Beijing rolls on and investments from the mainland come under greater scrutiny in the U.S. and Europe, Chinese companies are increasingly turning elsewhere.
One country poised to gain in investment is Israel.
“There’s been a secular uptrend in Chinese investment in Israel for the past eight to 10 years, but it has been accelerating,” said Steven Schoenfeld, founder and CIO of BlueStar Indexes, a firm that develops Israel-focused indexes and exchange-traded funds.
The vast majority of investment in Israel today still originates from domestic sources as well as the U.S. and Europe, but Schoenfeld said money from China and the broader Asian region has “grown a lot,” with companies from Singapore, South Korea and Japan all “establishing some beachhead.”
Speaking with CNBC’s “Squawk Box,” Schoenfeld said Chinese companies are attracted to Israeli technology for multiple reasons.
Beyond the potential applications of such tech in China, Schoenfeld said many of the Middle Eastern country’s companies have global operations and are at the same standards as Silicon Valley — without the sky-high valuations.
Some safeguards have been put in place for foreign investment in sectors such as defense and cybersecurity, where Israel has “some of the same protections” as the U.S., but Schoenfeld said Chinese investment into the country’s tech sector has generally been “quite welcome.”
The scope of Chinese investment in Israel covers “pretty much every major disruptive tech sector,” he said, pointing to industries such as the autonomous and electric vehicles spaces, where the major Chinese auto manufacturers maintain research and development centers.
In other sectors such as the application of artificial intelligence, Schoenfeld said Israel is “one of the leaders in almost every field.”
According to Schoenfeld, the visibility of Chinese investment in Israel has increased as a result of infrastructure investments as part of Beijing’s multinational Belt and Road Initiative.
“If you look on a map, Israel is incredibly strategically located for the Belt and Road Initiative,” he said, highlighting investments in infrastructure such as Chinese firms’ ongoing construction of a railroad between the cities of Eilad and Ashdod.
