Sep. 5, 2016
The Chinese government recently announced a new five-year plan for 2016 to 2021 that has caught the eye of Israel’s Economy and Industry Ministry. The plan, which comes on the heels of slower economic growth in China last year, provides for a continuing shift of the Chinese population from rural areas to the cities – which should increase demand for food, according to Chaim Martin, one of the ministry’s commercial attaches in China.
“There are several central points in the five-year plan, the most important of which is the transition from rural residents to the cities and the ability to accommodate 1.5 billion people whose standard of living is rising, along with demand for food,” Martin said. “The Chinese want to develop smarter agriculture to produce more food and a health care system that will ensure better social support.”
The Israeli Economy Ministry, he said, is preparing for this change and boosting its activity in China, where there are currently four Israeli offices headed by commercial attaches, with a fifth expected to open soon.
“We are now sending more delegations of companies in the field of technology and agriculture to China,” he noted. “We are in touch with provincial governments in China in an effort to integrate [Israeli] agricultural technology in government and civilian projects. At the same time, we are working with the Chinese Health Ministry to integrate medical technologies in the provinces. For this purpose, we are also working with private Chinese firms.”
Israel has already had success in China, with the construction of municipal water systems and modern cowsheds based on Israeli technology.
The global information and insurance firm Coface noted that the new Chinese policy, which has been dubbed “a two-speed reform,” provides incentives for growth in some sectors at the expense of others. Carmine Mandola of Coface Israel said that the preferred sectors that are expected to see higher and longer-term growth include pharmaceuticals and retailing.
The drug industry is the only one that Coface ranks as low risk. It is expected to show long-term growth, in part from growth in demand as the Chinese middle class expands and as the population of the country ages. Other sectors predicted to benefit are transportation and communications, though Coface warns that risks in the Chinese communications sector are high due to stiff competition. And, in contrast to the Israeli Economy Ministry’s outlook, Coface doesn’t see crop production as a growing sector.
Israeli exports to China actually declined by about 10% in the first half of this year over the same period last year, the Central Bureau of Statistics reported. The drop, from $1.2 billion to $1.08 billion, was partially due to slower growth in China in general, although the Chinese economy is still growing at a fast clip compared to many Western economies. Last year it expanded by 6.9%. Coface predicts that growth will fail to reach the 6.5% average target set by the Chinese government this year and next.