Israel’s Innovation Aligns with China’s Policy Priorities: Unlocking Investment Opportunities

China and Israel share similar economic priorities, with Israel’s strengths in areas such as HealthTech, AgriTech, Greentech, and Cleantech, offering significant collaboration opportunities.

China’s dynamic economic landscape is shaped by a strategic vision that prioritizes key areas of development. At the forefront of this vision are essential policy priorities, including healthcare system improvement, sports industry development, elder care, rural revitalization, vocational education, and the pursuit of a green, low-carbon, and circular economy. These priorities underscore China’s commitment to holistic growth, sustainability, and societal well-being.

In tandem with these forward-looking objectives, Israeli innovation and investment have the opportunity to play a key role in aligning with and enhancing China’s developmental aspirations. The innate strengths of Israeli businesses resonate with China’s vision, presenting a symbiotic relationship that can yield significant benefits for both nations.

Building on the longstanding relations between China and Israel, in this article, we introduce the convergence of these visions, shedding light on how Israeli businesses can benefit from China’s investment and policy priorities.

China’s policy priorities for growth and development

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In its development path, China has strategically shifted its focus towards key priority areas, spanning healthcare, agriculture, sustainability, and energy transition. With a vision for comprehensive growth and development, the nation is actively steering its priorities to align with innovative strategies and advancements in these crucial sectors.

In line with these objectives, China’s 14th Five-Year Agricultural Plan, outlined by the Ministry of Agriculture and Rural Affairs, charts a course for the country’s food supply and agricultural modernization.

Indeed, China is actively advancing eco-friendly agriculture, making strides in green agricultural development. The National Agricultural Sustainable Development Plan for 2015–2030, along with the Opinions on Innovating Institutional Mechanisms to Promote Green Agricultural Development, highlight 40 national green agricultural development pioneer zones where efforts and investments will be concentrated to promote these innovations. Additionally, initiatives targeting zero growth in chemical fertilizers and pesticides underscore China’s commitment to environmentally conscious farming practices.

To safeguard agricultural production from disasters, China has also formulated and enhanced disaster response plans, deploying advanced technologies for prevention, mitigation, and escape. The country is focused on disaster monitoring, prediction, early warning, and prevention capabilities to minimize the impact of unforeseen events on agriculture.

In the push for cleaner energy, China has set clear goals in its 14th Five-Year Plan on Renewable Energy Development (2021-2025). The plan aims to achieve a 50 percent boost in renewable energy generation and ensure that 33 percent of the electricity consumed comes from renewable sources by 2025. Additionally, there’s a directive that half of the new electricity and energy used in China between 2021 and 2025 should be from renewable sources. These targets indicate a strong commitment to creating a more sustainable and environmentally friendly energy landscape.

Healthcare is another investment priority area for the country. In response to a significant and rapidly aging population, the Chinese government has proactively endorsed the expansion of the healthcare sector through comprehensive policy initiatives and developmental roadmaps. Central to these efforts is the “Healthy China 2030” initiative, introduced in 2016, serving as a cornerstone for the nation’s healthcare industry development. Encompassing diverse objectives, from reducing infant mortality rates to addressing air pollution, the initiative sets a pivotal goal for the healthcare service industry to achieve a value of RMB 16 trillion (approx. US$2.4 trillion) by 2030.

Building upon these foundations, the National Development and Reform Commission (NDRC) also unveiled the 14th Five-Year Plan for National Health in mid-2022, establishing ambitious health targets for the year 2025.

Beyond enhancing healthcare infrastructure and service quality, the Chinese government has launched initiatives emphasizing long-term disease prevention and the overall well-being of the population. These include, among others:

• The 14th Five-Year Plan Sports Development Plan: Encourages exercise by building and expanding access to sports and fitness infrastructure; and
• The 14th Five-Year Plan for the Protection and Development of People with Disabilities:  Outlines measures to improve the quality of life of people with disabilities, including enhanced quality of care.

Short-term priorities outlined at the Central Economic Work Conference

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During its annual Central Economic Work Conference (CEWC), held in December 2023, China laid out a strategic roadmap that places a high-level opening at the forefront of its economic agenda. This extends particularly to pivotal sectors such as healthcare, services, and telecommunications, aiming to cultivate an environment conducive to heightened collaboration and participation within these industries.

Central to this initiative is a resolute commitment to fostering innovation, underscored by targeted efforts in:

• Promoting new-type industrialization;
• Fostering the growth of the digital economy;
• Expediting the development of artificial intelligence (AI); and
• Advancing agriculture and optimizing rural work.

Similarly, in guiding China’s economic trajectory through the complexities of post-pandemic recovery, the government places a strategic emphasis on cultivating new avenues of consumption, which include digital, green, and health-related consumption.

Moreover, during the 2023 central rural work conference in Beijing, President Xi Jinping emphasized the crucial role of technology in modernizing agriculture, stressing the need for breakthroughs in core agricultural technologies and enhanced disaster prevention capabilities.

China’s ‘Encouraged Catalogue’ and key investment sectors

The Catalogue of Industries for Encouraged Foreign Investment, often called the ‘encouraged catalogue’, is a compilation of sectors and industries into which the Chinese government seeks to attract foreign investments. To incentivize investment in these industries, certain benefits like tax advantages, import duty exemptions, and other favorable policies may apply.

China actively promotes foreign investment in key sectors to drive innovation and economic growth. In the high-tech manufacturing industry, part of the “Made in China 2025” plan, opportunities abound in robotics, semiconductors, biotechnology, renewables, and aerospace.

The booming healthcare sector welcomes foreign investment in pharmaceuticals, medical devices, and health services, with a focus on research and development in regenerative medicine and biotechnology. China’s e-commerce and digital economy, driven by smartphone use and online services, present lucrative opportunities for foreign companies investing in technologies like mobile payments and cloud computing.

Environmental protection and clean energy are also key priorities, with rapid growth in renewable energy sources. Foreign investment in clean energy and waste management aligns with China’s commitment to reducing its carbon footprint and achieving sustainable development.

In the most recent version of the Catalogue of Encouraged Industries for Foreign Investment (hereafter the “2022 FI Encouraged Catalogue”), which came into force on January 1, 2023, the Chinese government clearly outlined key sectors where foreign investment is not only encouraged, but actively sought.

With reference to this, Ines Liu, Senior Manager of International Business Advisory at Dezan Shira & Associates, shared insights on the potential synergies between Israeli companies and the Chinese market:

“When I look at the most updated version of the encouraged catalogue, some sectors just catch my eye: healthcare, agriculture, and green tech, in which Israeli companies maintain advantages. Particularly in the area of innovative agricultural practices and technologies, wastewater treatment, and water management, Israel has gained the status of a high-quality international player in environmental protection to address environmental concerns. I do believe those alignments in objectives shall be emphasized and will be highly valued in China’s market.”

Prioritized domains among the newly added and/or refined sectors include, among others, those highlighted in the table below.

This synchronized approach, where strategic government priorities align with targeted foreign investment encouragement, not only showcases China’s proactive stance in shaping its economic future but also presents a plethora of opportunities for international investors looking to engage with the nation’s evolving economic landscape.

Israel’s innovation pillars: From healthcare to environmental solutions

Renowned as the ‘Startup Nation,’ Israel has proven its mettle across diverse industries, particularly in HealthTech, AgriTech, and sustainable solutions.

HealthTech and digital healthcare

In the 2022 World Index of Healthcare Innovation, Israel secured the 6th position globally and claimed the top spot in Asia. Notably, the country’s excellence extended across all dimensions, with a notable stronghold in Science and Technology (S&T), where it ranked 9th. This achievement is attributed to Israel’s resilient scientific community, bolstered by its renowned university system.

While Israel may have a conservative approach in approving innovative drugs through its Institute for Standardization and Control of Pharmaceuticals, it remains a hotspot of medical innovation. This distinction is underpinned by a notable surge in healthcare patents, underscoring Israel’s unwavering commitment to advancing medical technologies.

According to data from Start-Up Nation Finder, Israel’s share of global investment in the health technology sector has seen a steady increase from 1.5 percent in 2014 to 4.5 percent in 2019. Despite facing financial challenges in 2022, the country still managed to attract US$1.5 billion in investment capital. In 2021, it received a remarkable US$2.6 billion in investments.

Israel’s life sciences and HealthTech sectors collectively host over 1600 companies, including approximately 700 in the digital health subsector. These companies focus on creating diverse solutions, from wearable digital devices to open, secure data, and interoperable platforms, addressing well-being and care delivery.

The table below highlights three notable areas where Israeli companies are advancing in the field of digital health.

Medical devices

Israel’s medical device industry continues to thrive, driven by innovation and a commitment to improving healthcare delivery worldwide. Companies like Biobeat Technologies, ClearCut Medical, and EfA Technologies exemplify the nation’s dedication to developing cutting-edge solutions that address critical healthcare challenges. Through collaboration and technological advancements, these companies are shaping the future of medical devices, contributing to better patient outcomes and healthcare accessibility globally.

As already mentioned in the table above, Israel’s medical device sector features notable innovations in remote monitoring and healthcare solutions. Companies like Biobeat Technologies have pioneered wearable monitors utilizing PPG-based sensors, offering continuous and accurate readings of essential health parameters. Their remote patient health monitoring AI platform assists healthcare professionals in tracking patient data and providing timely interventions, enhancing patient care in cardiovascular, general health, and primary care settings.

Cancer treatment

In the realm of cancer surgery, Israeli companies such as ClearCut Medical have introduced groundbreaking solutions utilizing MRI technology. Their ClearCoastTM MRI imaging system allows real-time margin assessment during cancer surgeries, particularly in breast-conserving surgery. By enabling precise intraoperative analysis of tumor removal, ClearCut Medical aims to minimize the need for re-excision, potentially improving patient outcomes and reducing healthcare costs.

Diagnostics

Similarly, Israeli innovators EfA Technologies are reshaping point-of-care diagnostics using artificial intelligence and advanced technology. EfA’s vision to bring the laboratory to the patient underscores their commitment to providing early diagnostic decision support tools. Their RevDx platform integrates miniature automated microscopes, microfluidics, biosensors, and AI algorithms to facilitate early diagnosis and improve patient care across various medical fields, including general health, hematology, and infectious diseases.

AgriTech and innovative farming

Israel has been a hub of agricultural innovation for decades. Despite challenging conditions such as a harsh climate and limited arable land, Israel manages to produce 95 percent of its own food and exports high-quality produce globally.

As of January 2023, approximately 500 Israeli agricultural technology (AgriTech) startups were at the forefront of developing groundbreaking technologies to address global agricultural challenges.

Industry 4.0 applied to farming

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Referred to as the fourth industrial revolution, Industry 4.0 encapsulates the ongoing rapid advancement across various industries, driven by enhanced data analytics and new equipment aimed at streamlining and augmenting production. Noteworthy innovations within Industry 4.0, including drones, robotics, and artificial intelligence, find crucial applications in the AgriTech sector.

A prime example is Bluewhite, a Tel Aviv-based company that has engineered autonomous tractors and farm vehicles. These vehicles are designed to perform tasks such as spraying, mowing, and discing fields while simultaneously collecting valuable data on crop conditions. This technological advancement enables farmers to remotely manage their fields, leading to reduced labor costs, minimized health risks to workers, and increased overall productivity.

Lavie Bio, headquartered in Rehovot, adopts Industry 4.0 practices through its exclusive computational predictive technology, which is instrumental in creating natural biostimulants and biopesticides.

Another innovative player in this field is Tevel, a company specializing in advanced smart unmanned aerial vehicles for harvesting. Faced with a pressing need for robotic solutions, the company aims to address the primary challenges of modern agriculture, particularly the shortage of labor for harvesting. The intelligent drones developed by Tevel offer a flexible, cost-effective, precise, and reliable solution to these pressing issues, along with demonstrated with outstanding operability.

Genetic and synthetic biology

Advancing crop quality through genetic and synthetic biology is a prominent focus in Israeli AgriTech. In this arena, startups are dedicated to enhancing the resilience and productivity of crops on a genetic level, addressing various agricultural challenges.

ProJini Agchem, situated in Tel Chai, specializes in molecular targets, particularly protein-protein interactions. Leveraging a platform to identify challenging pest targets at the molecular level, the company is developing innovative pesticides, potentially eliminating the need for conventional biocides with risks to human and ecological health.

On a similar trajectory, BetterSeeds, based in Givat Hen, utilizes genome-editing technology based on CRISPR to design and cultivate seeds that yield superior crops. Accelerating the process of genetic crop modification, the company creates new varieties in a few years rather than decades. Their genetically modified soybeans, tomatoes, cucumbers, and allergen-free peanut strain contribute to consistent, resilient harvests under varying conditions.

Food waste-management

Addressing the global challenge of food waste, Israeli AgriTech companies are pioneering innovative solutions to enhance efficiency throughout the food supply chain, ultimately reducing waste that amounts to up to 45 percent of globally produced food.

In this context, Ripe-Guard and Clarifruit have emerged as key players, offering advanced technology platforms designed to measure the ripeness of fruits and vegetables. Ripe-Guard, with its shelf-life prediction system, empowers growers, distributors, and retailers with accurate timelines for produce ripening and spoilage, facilitating better-informed distribution decisions. Meanwhile, Clarifruit employs cutting-edge computer vision technology to analyze images of produce, streamlining quality control processes along the supply chain.

Greentech and cleantech

According to Start-Up Nation Central’s 2023 Climate Tech Landscape Map, there is a thriving ecosystem comprising more than 850 companies actively involved in advancing decarbonization efforts, either directly or indirectly.

Israeli startup ventures possess a wealth of expertise spanning various domains including smart mobility, digital health, fintech, and cybersecurity. This collective knowledge positions Israel to emerge as a frontrunner in the climate-tech arena.

Moreover, Israel’s unparalleled prowess in water management, irrigation solutions, and precision agriculture sets it apart, enabling the nation to tackle challenges such as desertification reversal and fostering sustainable agriculture practices in arid climates.

With a reputation as a global player in clean technologies or Greentech, Israel has emerged as a leader in crafting innovative solutions to address environmental concerns. This recognition is particularly remarkable considering its relatively low global contribution to greenhouse gas emissions, standing at a mere 0.18 percent.

The Israeli Cleantech Ecosystem stands as a testament to the nation’s vibrant innovation culture, fueled by engaged academics, robust support organizations, a plethora of VC funds, and governmental backing. The intricate web of this ecosystem encompasses private corporations, startups, public entities, incubators, accelerators, VC funds, and facilitators, collectively shaping the landscape of sustainability and environmental solutions.

Israel excels in producing diverse energy solutions, including solar farms, wind turbines, and hydrogen generators. Technological advancements have enhanced the competitiveness and accessibility of cleaner energy sources. Notably, hydrogen and electric vehicles represent pivotal trends in addressing global energy-related carbon emissions.

In the context of waste and recycling, tackling plastic consumption, startups like Tipa focus on compostable materials, while UBQ Materials pioneers waste-conversion technology, converting organic and unrecyclable waste into a plastic substitute, which is then used to replace plastic, wood, and other types of materials across hundreds of applications and products.

EV infrastructure and platforms

Israel is not only a growing market for electric vehicles (EVs) but also a significant innovator in the field, contributing to the global EV market’s advancement. Israeli companies are at the forefront of developing state-of-the-art EV technologies, shaping the future of transportation.

Examples of leading Israeli startups in the ground and air transportation electrification sector include (but are not limited to):

• StoreDot: Specializes in nano- and organic compound-based batteries for electric vehicles, leveraging AI and machine learning to enhance battery performance, safety, and management in real-time.
• Urban Aero: Pioneers ducted fan aircraft, focusing on unmanned aerial vehicles with vertical take-off and landing capabilities, potentially revolutionizing intra-city travel.
• VisIC Technologies: A provider of high-voltage GaN devices, offering efficient power conversion solutions for electric vehicles with its true GaN Metal-Insulator-Semiconductor High Electron Mobility Transistor (MISHEMT) technology.

Carbon analytics and earth data

In terms of carbon analytics and data collection, Albo Climate, an Israeli firm, is pioneering a groundbreaking approach by integrating AI with satellite data to accurately measure carbon absorption on land, with future prospects for sea-based assessments.

Comprising predominantly of Israeli technology specialists collaborating with environmental experts from abroad, Albo Climate is poised to make significant contributions to combating global warming and climate change. By facilitating the scaling up of carbon removal from the atmosphere, the company aims to play a pivotal role in this critical endeavor.

Established in 2019 and headquartered in Tel Aviv, the company leverages data from satellite-mounted sensors to generate detailed maps pinpointing carbon storage locations. This innovation empowers landowners and governments to capitalize on the sale of offset credits to industries with pollution footprints.

Fintech

Israel’s fintech landscape has experienced remarkable growth and innovation, solidifying its position as a global player in the industry. With the highest concentration of startups per capita, Israel continues to make significant strides in fintech, attracting substantial investments and fostering a dynamic ecosystem for financial technology development.

In 2021, Israeli fintech startups raised approximately US$4.5 billion, surpassing previous years’ funding totals and showcasing the sector’s rapid expansion. Notable companies like eToro, Payoneer, Lemonade, and Rapyd have emerged as leaders in the field, with one in every five Israeli unicorns being fintech-related.

The country’s proactive approach to scaling and international expansion has propelled its fintech ventures onto the global stage. Israeli companies are not only being acquired by international players but also acquiring others to maintain their competitive edge.

Moreover, Israel’s fintech ecosystem is witnessing innovations in areas such as cryptocurrencies and non-fungible tokens (NFTs), with significant investments and developments in these segments.

How Israel’s businesses can align with China’s investment priorities

As China’s economic agenda evolves, Israeli businesses stand poised to contribute meaningfully to its developmental priorities. By leveraging their strengths in sectors such as HealthTech, AgriTech, and Greentech, Israeli innovators can find ample opportunities for collaboration and investment in key sectors outlined by China’s policy priorities.

This alignment not only facilitates economic growth but also fosters a partnership that addresses global challenges, creating a win-win scenario for both nations on the path to a sustainable future.

In 2022, as the two countries celebrated the 30th anniversary from the establishment of their diplomatic relations, China’s Ministry of Science and Technology together with Israel’s Ministry of Economy and Industry, Jiangsu Provincial People’s Government, and the Israeli Embassy in China, organized the China-Israel Innovation Cooperation Week in Changzhou (Jiangsu Province). The ceremony also marked the launch of the China-Israel International Innovation Park, a core carrier of the innovation system in Changzhou. The Park, adhering to the development concept of “production, life, and ecology” integration, focuses on creating an international community with functions such as technology research and development, incubation acceleration, financial business, and living support.

High-tech Israeli companies also actively participated in the 2022 China International Import Expo (CIIE), indicating a growing interest in the Chinese market. Edward Shapira, Consul General of Israel in Shanghai, highlighted the impressive platform that CIIE provides for Israeli companies, with their numbers doubling over the past six years.

This confluence of events and collaboration showcases the enthusiasm among Israeli stakeholders to explore business opportunities and expand their presence in China.

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