Some Israeli companies view China as major growth market

(JNS) - Despite the ongoing coronavirus pandemic and increasing tensions between the United States and China, Israeli companies continue to view China as a major market for growth and development. Executives from two such companies have told JNS in recent weeks about their ongoing operations in China.

The PTL Group is an Israeli-owned Chinese company that provides support to multiple international companies taking their first steps in the Chinese market. Its chairman, Zvi Shalgo, said in a statement that "the demand for the Chinese market goes on and continues to grow. We haven't seen companies avoid entering the market or change their plans. On the contrary, some are working to set up new operations right now."

Avner Ben-Bassat, CEO of Plataine, an Israeli developer of artificial-intelligence-based solutions for the optimization of manufacturing processes in advanced industries, said he projected that the company's operations will grow significantly with time, "even though we had to update our plans due to the COVID-19 outbreak."

Plataine's optimization systems have been installed in heavy industrial plants, such as wind-turbine manufacturing, automotive supplies, furniture manufacturers and civilian-aircraft production sites. "Our core technology is an AI-based software system. It can connect to the production line, to the machines online and their sensors and gather figures on them. It 'understands' what is happening, and makes predictions. If something negative is about to happen, it will generate an alert," explained Ben-Bassat.

The system knows how to alert operators to flawed components, warn about upcoming bottlenecks and urge production managers to take action. It can even notify production lines of delays up ahead and the need to change a working plan, or to gather materials from other sources. The technology is powered by advanced algorithms, said Ben-Bassat, adding that "the secret to success is making this available - not only to math experts, but to employees on the production line."

The software creates a "smart factory," said Ben-Bassat, making hundreds and even thousands of routine decisions that would normally occupy employees' time.

"We believe in human-machine teams and giving people a better tool to free them up from the simpler decisions and get them on to the bigger challenges. This gives them more time to think ahead, for example, to work on the next proposal to a client," he said.

The company is active in the United States, Europe, China and Israel, and every year, it adds new sectors, such as shipyards.

'The Chinese economy has resumed its functioning'

The Chinese market is an "obvious destination" for Plataine, said Ben-Bassat. After setting up operations, the company "quickly realized we can't do this by remote control and decided to set up a local team of Chinese citizens," he explained, enabling Plataine to engage local clients with local know-how on deal closing and business culture.

Ben-Bassat said that in January, just before the pandemic erupted, Plataine was experiencing "very good momentum" with a rise in sales and future clients in the pipeline. This occurred despite the ongoing trade war that had already been raging between the United States and China, which caused some of Plataine's companies to simply pick up their entire factory and move to Vietnam, where Plataine is also active.

Once the pandemic struck, "we were first worried about the welfare of our employees in China," he said.

Nevertheless, after two months of lockdown, the company saw that activities had picked up just where they left off, he added. "The Chinese economy has resumed its functioning; my team in China flies to visit clients and close deals." In the meantime, he noted, the local team has become more independent since Israeli executives and product managers cannot currently fly into China.

Chinese companies that are directed towards local consumption have weathered the storm better, Ben-Bassat said, while those that are based on exports are facing greater difficulties, due to the recessions in Europe and America.

"In the end, the whole world is a community, connected by the umbilical cord. I live these links," he said. "China will continue to be a central market."

Asked about the recent pressure placed on the Israeli government by the United States to reduce contracts to Chinese companies, Ben-Bassat said that his own company does not deal with security-based or sensitive technology sectors in China and sticks to manufacturing.

"There are some sectors I pass on for a variety of reasons. It's not a difficult dilemma," he said. "We do have security clients in the U.S. and Israel, in line with Israeli regulation. In China, we limit ourselves to the civilian sector. That provides more than enough business."

'Bolster our partnerships with existing customers'

The Trump administration, which has had a strong relationship with Israeli Prime Minister Benjamin Netanyahu, has pushed heavily on its allies to distance from China. In June, U.S. Secretary of State Mike Pompeo told the American Jewish Committee's Virtual Global Forum that China is "a growing challenge to the United States, to Israel, indeed to all free people."

In particular, America has expressed concern over Chinese control over investment in infrastructure and technology, such as 5G networks. Israel has taken heed of these warnings to some extent, recently denying China the opportunity to build Israel's Sorek B desalination plant.

Eran Navon, regional director of Asia-Pacific at GeoEdge, an Israeli company that provides automated Quality Assurance and cyber-security tools for online ads, said "advertising trends in China are currently quite similar to Europe and the USA."

He explained that "we are seeing a slowdown and cutting back on the advertising budgets of the large brands. Contrary to what many might think, this creates a large supply of programmatic advertising space at a relatively low cost. As a result, viewers are exposed to low-quality ads with inappropriate content, often accompanied by security issues, too. These issues drive the need for our services. We are using the current time to bolster our partnerships with existing customers. At the same time, we have had quite a few success stories with newly introduced customers."

Navon said that the coming months represent significant opportunities in China with the economy reopening and companies returning to spending. "China is going through a process of reorganization. New opportunities are waiting for every entrepreneur."

Navon has lived in Beijing for six years now and speaks Chinese. He has been promoting Israeli-Chinese technological cooperation for nearly a decade, mainly with small- and medium-sized companies, ranging from startups to media companies.

GeoEdge, which specializes in cyber scanning of digital advertising in real time, ensures that ads have no malicious malware and don't redirect users to unwanted content without their consent. The company is active around the world; in China, it works with app developers and advertising platforms.

"We also block inappropriate content thereby ensuring a high level of content and user experience," he told JNS. "The advertising world lacks regulation and is exposed to malicious actors. We are an indication of quality and regulation," he added.

When the coronavirus pandemic erupted, the company's entire environment was naturally affected. "The uncertainty and financial instability meant that large advertising budgets were frozen," said Navon. Lower-quality ads filled the vacuum as a result.

With people at home during lockdowns, a growing numbers of online users visited Chinese websites and applications. At the same time, malicious advertisers were taking advantage of the situation due to their ability to purchase greater online space.

This helped contribute to a rise in defective advertising, designed to pull users to questionable landing pages, explained Navon. "We are there to help our clients maximize their profit potential, but to also safeguard their users experience," he stated. "Our clients' ad revenue decreased, but their need for our services increased, creating a special phase in the relationships," he acknowledged. "We were very much strengthening our ties with our clients during this time."

Navon is the company's sole representative in China, where he works with tens of clients. Even when he couldn't fly to visit clients, his fluency in Chinese and the fact that he was in the same time zone meant that he could continue to work with them on a daily basis.

"I haven't left Beijing in six months because of the restrictions," he noted. "But it now is becoming possible to travel. The objective is to visit clients, to strengthen ties."

Navon said he has not felt the consequences of growing U.S.-China tensions, adding that many of his competitors are American companies operating in China.

"The Chinese private sector is very oriented towards finding the best quality partners and suppliers. If companies here see an opportunity to work with American technology that meets their needs, they will do so. There is no declared boycott here."

Israelis, he said, have a positive reputation for innovation in China-a factor that provides a certain advantage at the start of interactions.

"As an Israeli and even a Jew living in China, I can say that we have a favorable reputation among Chinese people, especially in Shanghai, which had a Jewish community made up of [World War II] refugees. This community is very fondly remembered," he noted.

"There is an aspect to Chinese society that very much welcomes foreigners," he elaborated. "The cultural differences are very significant. No matter how well I speak Chinese, it will be there, but the overall sense, even during the coronavirus period and accusations between China and the U.S., is of mutual respect with foreigners."