Chinese rolling stock manufacturer CRRC is receiving mixed messages from Israel. CRRC was not approved as a supplier of carriages for the Jerusalem light rail Blue Line but is currently in negotiations worth millions of euros with the state to supply additional carriages for the Tel Aviv light rail Red Line.
US pressure over the Jerusalem light rail deal shuffled the deck, and if before the Israeli policy was vague, and was intended to keep the Chinese in the picture while satisfying the US in certain areas, now according to industry sources there is no policy at all, and it is unclear when it is possible to cooperate with Chinese companies and when not: if not as contractors, is it possible as suppliers? And if not as suppliers, is it possible for manual workers in the field of civil engineering? There are no answers, and the pressures exerted from all directions are disrupting the industry.
Earlier this month, it looked like the Jerusalem light rail Blue Line project had screeched to halt, after the Ministry of Finance accountant general canceled an agreement by the winning consortium of Dan and Danya Cebus (TASE: DNYA) to procure carriages from Chinese company CRRC. This followed US pressure to avoid dealings with the Chinese state-owned company.
The consortium turned to the Chinese after Polish company PESA withdrew from the project last year, due the increasing risk of doing business with Israel and the downgrade of its credit rating. So as not to delay the project, funding for the civil engineering work has been approved in the meantime, and it has been decided that within six months procurement of carriages will be arranged through a new tender.
Disqualified for not meeting economic viability tests
Chinese state-owned company CRRC is well-known in Israel. When CRRC competed with Egged and Shikun & Binui for construction of the Tel Aviv light rail construction Green and Purple Lines, the bid failed not because of Chinese involvement, but because it did not meet economic viability tests. The tender committee believed that it was a sloppy bid, which had no feasibility and would later cost the state huge extra sums to complete the project. The excuse the state found for quashing the bid allowed it to avoid declaring an official policy on Chinese participation in infrastructure projects due to US opposition. But while Chinese companies are essentially blocked from building Israeli projects, industry sources believed that they could still compete as suppliers to construction companies.
CRRC had also supplied the Tel Aviv light rail Red Line carriages after winning a tender in 2015 to supply 90 carriages, a 16-year maintenance contract for the carriages and infrastructure, and an option to purchase an additional 30 carriages. The results of the tender also stood the test of the courts. Many petitions were filed against it after the Chinese won due the low price provided compared with their European rivals. Now Israel is seeking to exercise the same option to procure the carriages. The state may have no choice but to exercise the option with the Chinese, since they already won the supply of the carriages years ago.
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The state paid about €1.6 million for each such car, and today’s prices will exceed €2.5 million, according to market sources. When the tender was announced, the Chinese companies reputation rose in the eyes of the Israeli government. Then Minister of Transport Israel Katz visited China and was eager to connect with the Chinese. Another Chinese company, SIPG, won the operation of the Haifa Bay Port in those years, and Chinese companies submitted bids for dozens of infrastructure tenders. In 2019, when the Chinese began delivering the first carriages to Israel at a festive ceremony held in China, an NTA representative said, “After the very good experience we have had so far, we expect CRRC to participate in our future lines.”
Pressure grew due to the trade war
A study published in 2022 by Galia Lavi, a researcher on Israel-China relations at the Institute for National Security Studies (INSS), examined 46 tenders from 2001 to June 2022, worth over NIS 100 million. The data show that Chinese companies participated in and won more tenders than any other foreign country. Lavi’s article points to peaks in Chinese companies winning tenders held in 2015 and 2019. In contrast, 2020 served as a turning point, with only 25% of all tenders to which Chinese companies applied winning. “The decline in the winning rate of Chinese companies can be attributed to the beginning of the operation of the Advisory Committee for Examining National Security Aspects of Foreign Investments in 2020,” Lavi noted in her study. Since then, their success rate and participation in bids have decreased.
The change in trend identified by Lavi was seen on the ground, when CRRC was disqualified from building the Tel Aviv light rail Green and Purple Lines. The US pressures, which were also exerted during the Biden administration, have now intensified under the Trump administration’s trade war, and reached their peak this month when they forced the country to withdraw from a carriage deal that will still be discussed legally and whose implications are unclear. However, industry sources say that Israel has abandoned its policy of ambiguity following explicit US pressure, and now there is no policy at all.
So while the Accountant General announces, following US pressure on the Prime Minister’s entourage, that the company will not supply carriages for the Blue Line in Jerusalem, the government is at the same time negotiating procurement of carriages from the same company for the Red Line.
Major impact on energy tenders too
Another area in which the issue is expected to surface even more is with the many tenders in the energy sector, especially in renewable energies and storage. Thus, in some tenders, the majority of candidates are still Chinese companies, and removing them from the field completely could harm competition.
Another area in which Chinese competition is still critical in the eyes of government officials is Chinese foreign workers. Will Israeli companies be able to use the Chinese as subcontractors? There is no answer to that yet, but a mapping conducted by government offices of the manpower designated for the construction of the metro indicates that Israel needs both additional countries to participate in the project and the Chinese. If a clear decision is made against Chinese companies in general, Israel will be required to find solutions within a short time so that progress in construction of infrastructure projects does not stop.
Published by Globes, Israel business news – en.globes.co.il – on April 29, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
