Xi Jinping

Netanyahu asks Xi to exempt Israel from investment curbs

Israeli prime minister says technology deals suffering because of limits on the cash Chinese investors can take out the country

PUBLISHED : Wednesday, 22 March, 2017, 9:44am
UPDATED : Wednesday, 22 March, 2017, 11:40pm

The controversy over China’s ­foreign exchange restrictions has ­escalated to the diplomatic level, with Israeli Prime Minister ­Benjamin Netanyahu calling for exemptions to investment in ­Israeli technology companies.

Netanyahu made the request of President Xi Jinping during their talks in Beijing on Tuesday. He is the first foreign leader to express concerns over the restrictions imposed last year.

“I said that Israel’s a special case” because it “has significance for technology but it doesn’t have any significance in terms of volume on markets or currencies”, Netanyahu said after the meeting. He added that some start-up deals could not be completed ­because of the restrictions.

China accounted for about one-third of foreign investment in Israel last year, including the US$4.4 billion acquisition of ­Israeli social media and mobile games business Playtika.

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The world’s second-largest economy introduced strict capital control measures late last year as the US Federal Reserve’s interest rate increase drove up the US ­dollar index and exerted pressure on the yuan.

The move has raised concerns over its impact on the level of ­Chinese investment abroad, after years of a buying spree on ­overseas properties, sports clubs and companies.

The foreign ministry said in a statement that Beijing supported Chinese companies that were making legitimate investments in Israel.

China and Israel pledged to step up cooperation on innovation during Netanyahu’s four-day trip.

Observers said the foreign ­exchange restrictions should be reviewed, but that Beijing was ­unlikely to accept Israel’s request.

“There should be differentiated treatment for those bringing medium- and long-term benefits, but it is hard to do now when ­facing the pressure of capital outflows,” Zhang Ming, a senior ­fellow at the Chinese Academy of Social Sciences, said.

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Zhang said a relaxation for one country could lead to other ­nations, such as Australia – in which China is the second-largest investor – making similar appeals.

Chen Fengying, a senior researcher with the China Institute of Contemporary International Relations, said Beijing’s implementation of the exchange ­restrictions might have been “overdone in practice”.

However, Tan Yaling, head of the China Forex Investment ­Research Institute, said it was reasonable for China to introduce emergency measures with the economy facing the pressures of falling foreign exchange reserves and yuan ­depreciation.

Additional reporting by Bloomberg