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Israel forms committee to monitor Chinese investments amid Trump pressure

Israeli Prime Minister Benjamin Netanyahu and Chinese President Xi Jinping in 2017. Photo: Etienne Oliveau/AFP via Getty Images

The Israeli Security Cabinet decided Wednesday to form a committee to monitor Chinese investments — a decision Israeli officials say came after strong pressure from the Trump administration.

The state of play: The Trump administration first raised the issue of limiting Chinese investments in Israel two years ago, and President Trump himself raised it with Israeli Prime Minister Benjamin Netanyahu several times.

  • Netanyahu promised Trump in June that he would pass a Cabinet decision on the issue before Israel's September elections — but it didn’t happen, prompting U.S. frustration and pressure to grow.
  • Last week, Israeli national security adviser Meir Ben-Shabbat was in Washington for his first meeting with his new U.S. counterpart, Robert O'Brien. Israeli officials say a substantive part of the talks dealt with the American demand to curb investments from China.

The big picture: Earlier this week, Treasury Secretary Steven Mnuchin met with Netanyahu and Israel's Finance Minister Moshe Kahlon in Jerusalem. In both meetings, Mnuchin demanded that Israel make good on its promise to form a monitoring mechanism for Chinese investments, Israeli officials tell me.

  • According to the Israeli officials, Mnuchin raised concerns over Chinese investments in Israel's tech industry due to the fact that many Israeli companies are cooperating with U.S. companies or work in the American market.
  • Kahlon told Mnuchin that regulating Israel's tech industry could drive Israeli startups out of the country and badly damage the Israeli economy.
  • Both Netanyahu and Kahlon told Mnuchin they would pass a Cabinet decision on Chinese investments to address U.S. concerns.

Yes, but: The newly formed committee will only have an advisory role. Government regulators don't have to consult with the committee or accept its recommendations.

  • The committee will monitor Chinese investments in the areas of finance, communications, infrastructure, transportation and energy — but not in the tech industry.
  • The new committee will include representatives from Netanyahu's office, the Defense Ministry and the Finance Ministry — with each of the representatives having veto power on deals with China.
  • The Foreign Ministry, which pushed for accepting U.S. demands on the issue, will only have observer status.

The bottom line: It's still unclear if the new committee's mandate will satisfy the Trump administration, which demanded stronger restrictions on Chinese investments, especially in the tech industry.

  • Israeli officials tell me Netanyahu wanted to address U.S. concerns but was also worried that any decision would anger China and drive out Chinese investors completely.
  • The officials added that the Cabinet decision was a compromise between national security and relations with both the U.S. and China.

Go deeper: Israel scrambles to avoid Trump blowback over Chinese investments