A Chinese delegation organized by SIMBA (a partnership between Shirat Enterprises, IVC Research Center and Chinese-based private equity fund Mingda Group), which assists both state-owned and private Chinese investors in finding what they are looking for in the Israeli high-tech market, recently visited Israel. Among the members of the delegation was Wang Xuejun, president of China Galaxy Investment Management, who is also president of ZVCA, one of the largest venture capital and private equity organizations in China.
China Galaxy, which was founded in 2007 and is described as an NGO (non-governmental organization), manages capital of 4.5 billion yuan ($675 million), and invests in cleantech, Internet, information technology, and biomed.
ZVCA's aim is to assist Chinese investors in investing outside China and in forming international collaborations.
"China is a great global manufacturing center, and in order to maintain growth in manufacturing we are greatly in need of innovation, and Israel is known for its innovative technology," Wang says in explaining the reasons for the visit. "All the same, Israel is a small market, and so the aim of my visit is also to help Israel companies to grow globally and to work with Chinese companies in order to penetrate the Chinese market," he adds.
Wang says that, among other things, the basis for collaboration between Israeli and Chinese companies is the fact that Israel and China are similar in the way they focus on the education of the next generation. "It is not a matter of similarity between two education systems, but of the importance assigned to education, in the role it plays in technological and economic progress. Furthermore, Israelis are very direct and practical, like me," he said.
The search for innovation and/or new markets does not however abolish all the barriers to different kinds of collaboration between Israel and China. "Because of the language barrier and because of the way each side does business, information does not always flow between them in the right way, and misunderstandings frequently arise," says Wang, "Also, because many businesses in China are state controlled, they cannot always invest directly in Western companies, such as Israeli companies. This is one of the reasons that I came to Israel to form as broad a basis as possible for Israeli-Chinese cooperation."
Is the wave of Chinese investment in Israel just at the beginning, or will we see it slowing as a result of the economic slowdown in China?
"In my opinion, it's just beginning. This is the right time to invest in Israel, but the right people are needed in order for it to happen, and that's true of both sides. There are many people who talk about cooperation but who don't do anything, and that's a kind of bubble."
There are those who say that Israel is starting to lose its status as a startup nation. What's your view?
"For Israel to maintain its technological leadership, it must pay attention to the eco-system of its high-tech industry, that is, and ensure that the government and academic institutions continue to support it, and not just the private sector."
So you see no cause for concern?
"There is no need to worry about technological innovation itself. The concern is over how it is commercialized. Israel is a small market, and, in order to succeed, an Israeli company has to break through the limitations of Israel and form as many collaborations as it can with big markets like China. Israeli entrepreneurs sometimes try to form collaborations from a defensive stance, chiefly protection of intellectual property, and then their caution becomes a barrier. They need to be more open."
Do you see the rush by Israeli entrepreneurs to make an exit, instead of trying to build large companies, as problematic?
"No, it's appropriate to Israel. In Israel, it isn't natural to grow companies and build large companies like in the US. It is therefore legitimate that companies are sold at an early stage, and it's even an advantage. Innovation mainly emerges in small companies. Big companies are much less innovative, and innovation is what needs to be maintained."
Published by Globes [online], Israel business news - www.globes-online.com - on October 18, 2016
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