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Credit crunch shifts Israeli biz focus in China

(Xinhua)
Updated: 2009-04-20 09:46

JERUSALEM -- As the international credit crisis intensifies, Israeli business involvement in China is gradually shifting beyond the first tier markets along the coastline to address the needs of the country's more rural population inland.

Shift to More Rural Areas

Given the Chinese government's policy of "sticking to reform and opening-up and grasping developing opportunities," its 4- trillion-yuan (US$585 billion) stimulus package and timely 8 percent growth target are expected not only to boost the economy but also to transform the mode of economic growth and readjust its economic structure in the long run.

Israeli investors believed that a shift in productivity is emerging from China's coastal southeast, which is home to a string of factory hubs, to the more rural areas in the west. Some said they had shifted their gaze to China's west which is buzzing with potential.

Amir Gal-Or, managing partner at Infinity Group, a private equity fund with offices in Israel, China and the United States, told Xinhua that his fund was merely reacting to the shift in the market as China adjusted its needs in the wake of the credit crisis.

"The driver (for a business initiative) comes from the Chinese side. We are looking at our added value and are adjusting to it," Gal-Or said.

With a presence in Suzhou, Shanghai and Hong Kong, Infinity planned to expand to new cities in search of different opportunities that would allow it to adjust to the changing market conditions and broaden its portfolio, he added.

"Considering the current trend you don't want to increase credit, you want to diversify it," Gal-Or said. "The credit crunch reminded everybody that you can't go on pumping funds in one area, " Gal-Or said.

He said that a move into second tier cities would require a stronger focus on agriculture, while third and fourth tier cities also needed to be prepared through the creation and improvement of infrastructure.

"You want to reduce the risk of concentration. You want it to be balanced across the country," Gal-Or said, adding that the credit crunch had a balancing effect as it led to a migration of jobs away from the main center.

He also said that the fund chose destinations for expansion based on where it identified opportunities to add value and where they are welcomed.

Shift to More Potential Sectors

The shift not only comes in the areas but also sectors. The change in China is very clear that the new focus is attached on agriculture, medical services as well as clean tech related projects in rural areas, second-and-third-tier cities in western China, Gal-Or said.

For example, his company, which had originally targeted businesses in the semiconductor and IT sectors, is currently working on two deals. One is in the water industry, involving water supply and waste treatment, with desalination being an eventual goal of the company, while the other deal is about medical device distribution.

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