Recent decisions by China and Israel present a challenge to strengthening economic relations between the two countries.
China is disregarding sanctions on Iran following the snapback of U.N. measures and is increasing its economic cooperation with Tehran, including by providing materials for producing solid fuel for long-range ballistic missiles.
Concurrently, Israel has, for the first time, supported American-promoted resolutions regarding China.
China is one of Iran’s major trading partners. Despite sanctions, trade between the two countries has continued. China imports a large amount of crude oil from Iran, which mitigates the impact of sanctions on the Islamic Republic’s economy. Additionally, China has made significant investments in Iran’s infrastructure and energy sectors.
With the resumption of U.N. sanctions against Iran, Iran’s reliance on China is likely to deepen further. At the same time, China imports 11% of its total oil from Iran, a considerable figure.
United States sanctions against Iran and its trade policies toward China may create a balancing act for Israel, which is closely allied with the U.S., but also has significant economic ties with China.
Strategically, China may believe that maintaining a relatively detached stance is more conducive to its long-term interests, particularly as a “constructive third party” in Middle Eastern affairs.
The impact of the Gaza ceasefire
The Gaza war had some negative impacts on certain Chinese media, leading to subtle shifts in the diplomatic and policy approaches of relevant Chinese government departments toward Israel. This might have an uncertain effect on trade between the two countries.
The ceasefire in the Gaza Strip helped ease tensions in the Middle East, creating a more stable external environment for the economic development of Israel and neighboring countries. In this environment, Israel can focus more on trade cooperation with China, reducing trade disruptions and uncertainty risks caused by regional conflicts.
After the ceasefire, China will likely be more actively involved in economic cooperation and infrastructure construction in the Middle East. This provides more opportunities for Israel and China to cooperate in related fields, such as combining Israel’s technological and innovative advantages with China’s strength in infrastructure construction to jointly promote economic development in the Middle East.
Israel must strike a balance between maintaining regional peace and stability, and safeguarding its economic interests. Regarding trade relations with China, Israel needs to consider the benefits of economic cooperation while remaining cautious about over-reliance, which could affect its relationships with traditional allies such as the U.S.
During the Gaza conflict, Ashdod Port experienced a significant decline in throughput due to security issues, causing the transportation costs of Chinese goods exported to Israel to rise. Following the ceasefire, the port’s operation has resumed, and logistics transportation has become smoother, with transportation costs expected to decrease.
Consequently, Chinese exports, such as mechanical and electrical products, can reach their destinations more efficiently.
The trade volume is expected to increase. The conflict had a negative effect on trade volume between China and Israel. From January to May 2025, the trade volume was 12% lower than that of the same period in the previous year.
The Gaza ceasefire helped alleviate geopolitical tensions in the Middle East and reduced market uncertainties. This gives both China and Israel more confidence in investment and cooperation projects, promoting further deepening of collaboration in fields such as technology, agriculture and healthcare, and creating more opportunities for trade growth.
Challenges and uncertainties
Domestic political dynamics in Israel and its relations with neighboring countries may affect the stable development of China-Israel trade relations.
Pressure on trade structure adjustment may also pose a challenge. As the regional economy recovers after the Gaza ceasefire, the demand structure in the Israeli market may change. China needs to promptly adjust its export product structure based on the new demands of the Israeli market and enhance product quality and technological content to better meet those demands. This adjustment presents a challenge for Chinese enterprises.
The sustainability of long-term peace is uncertain. If the ceasefire agreement is not effectively implemented and the conflict flares up again, it will once more have an impact on trade between China and Israel, and enterprises need to be prepared to deal with these risks.
Following the ceasefire, the global trade environment is expected to improve, particularly with the reopening of the Red Sea shipping route, which will reduce global freight costs. This is beneficial to trade between China and Israel and provides a more stable external environment for China’s trade with other countries.
The ceasefire has created favorable conditions for Israel’s economy and social stability, which is conducive to Israeli enterprises conducting foreign trade better, including cooperation with Chinese enterprises.
After the ceasefire, Israel may increase its investment in infrastructure construction and economic recovery, providing more investment opportunities for Chinese enterprises. For instance, China and Israel can carry out broader cooperation in the fields of energy, technology, and agriculture to jointly promote the development of related industries.
To cope with uncertainties stemming from factors such as tariff wars and sanctions, Israel and China should enhance policy communication and coordination.
Inter-governmental dialogues, people-to-people exchanges, and trade negotiations can help the parties jointly address trade frictions and promote the stable development of bilateral economic ties. As Confucius observed, “A gentleman gets along with others, but does not necessarily agree with them.”
Israel and China can engage in cooperation in third-party markets to jointly explore international opportunities.
Israel possesses advanced technologies, which serve as the cornerstone for cooperation: Israel has globally leading technologies in digital technology, agricultural science and technology, and seawater desalination, which are highly complementary to China’s market size, manufacturing capabilities and infrastructure advantages.
As long as political relations between the two sides remain stable, trade and investment in high-tech can serve as an anchor against geopolitical risks.
The Sino-U.S. tariff war and associated supply chain security concerns are likely to push Israel to accelerate diversification of its supply chains for critical materials (such as rare earths essential to the defense industry).
The easing of regional tensions may usher in a new model of “triangular cooperation” between China, Israel and neighboring Arab countries.
Wang Shuangcheng has worked for decades at a foreign investment firm in Beijing, with experience across multiple industrial sectors, and has also been involved in promoting and facilitating Israel–China business cooperation.
Originally published by the Jerusalem Institute for Strategy and Security.
