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China’s footprint in Israel remains small, despite the hype

China’s role in the Israeli startup scene gets a lot of attention, but in financial terms it remains relatively small.

Chinese investors on average contribute just 12 percent of the capital raised annually by high-tech startups in Israel, though the yearly total continues to climb, according to IVC Research Center. And their participation as LPs in Israeli funds has fallen sharply from a 2014 peak.

China’s presence in Israel has been closely watched for its potential to broaden young companies’ focus beyond the United States and European investors that traditionally have brought capital to the market.

Motivating China appears to be the strategic value Israeli innovation might play in the country’s technical development.

According to IVC, Chinese investors backed 43 high-tech companies in Israel in 2017 against 42 in 2016. They put in $596 million, up nearly 10 percent from $543 million in 2016.

Five years ago in 2013, 26 companies received $232 million in investments. While activity has increased sharply over the years, it remains modest.

At the same time, just three Chinese LPs joined Israeli venture funds in 2017, down from nine in 2014, IVC said.

Chinese and Israeli flags are seen on a table during a signing ceremony for Tel Aviv University and Beijing’s Tsinghua University in 2014. Reuters/Baz Ratner.