By Manuela Zoninsein for IsraelStrategist.com–The signing of three large contracts in October demonstrates that relations between Israeli and Chinese businesses are blossoming in the clean technology space. Look closely to learn some key lessons.

On October 18, 2011 Tycoon Li Kaishing, China’s wealthiest individual, committed to Israeli mobile navigation application Waze, showing that new Israeli ventures in clean technology are worthy not just of Western capital, but of Chinese funds as well. Li’s investment also repositions China in a new light: no longer known only for labor-intensive manufacturing of low-quality goods, the People’s Republic (PRC) has begun flexing its money muscle, investing in cutting-edge projects around the world–especially those which can aid its move away from polluting power sources like coal and oil and toward renewable energy.

Another Israeli company, HelioFocus – a start-up utilizing solar thermal solutions for various applications – also received Chinese funding: an investment from Sanhua Holding Group that culminated in a $30 million capital injection in tandem with other investors. HelioFocus uses concentrated solar power based on innovative technologies to produce high temperature air for various applications such as power plants. This corresponds with the goal outlined in the Communist Party’s current Five Year Plan (FYP) to increase implementation of solar technologies, which is critical for companies seeking to enter China.

Going in the other direction, China National Agrochemical Corporation, a full subsidiary of China National Chemical Corporation (ChemChina) and China’s largest basic chemical corporation, turned Makhteshim Agan Group (MAI), the Israeli agrochemical chemicals and generics manufacturing giant, into a private company with 60 percent ownership by ChemChina and 40 percent by Koor Industries Ltd. This acquisition again shows that Israeli know-how fulfills the needs of Chinese companies (especially in agriculture).

For companies that seek to enter the Chinese market, “the main thing for Israeli companies is IP,” admits Rebecca Zeffert, Founder and Executive Director of the Israel-Asia Center based in Jerusalem, and organizer of the inaugural Israel-Asia Leaders Fellowship. Howe Wang, a Fox International Fellow from Yale University’s Macmillan Center for International and Area Studies, who has cross-border experience working in agricultural technology companies seeking to enter China, agrees that the “biggest issue is IP; that [companies] will lose the rights of their innovation.” He worries that foreign companies “have a naïve concept, that they can just use a legal infrastructure to protect themselves after signing an MOU.” He explains that, unfortunately, transactional and commercial law is still very basic in China, especially law in terms of international collaboration.

Options to address this concern are starting to emerge, however. Peggy Liu, Founder and Chairperson of the Joint US-China Collaboration on Clean Energy (JUCCCE), has experience successfully starting and selling tech companies in Silicon Valley and as a Venture Capitalist in Shanghai. Inspired by ideas emanating from the Massachusetts-based tech company EMC Corporation, all tech companieseverywhere are worried about their IP being imitated in their own backyards. To stay ahead of the competition, tech companies must continually innovate to risk losing their IP advantage, no matter where they’re based. Moshe Sadeh, Business Development Manager of HelioFocus, has found the same to be true in his company’s relationship with Sanhua. HelioFocus had to work closely with the Chinese company, sharing technology to ensure the two were appropriately suitable partners: “As with working with any commercial and business partner, part of the cooperation is learning to jointly protect the idea. It’s not unique to China, but relevant to any partner.”

JUCCCE–full disclosure, I recently joined their team–will host the fourth annual Clean Energy Forum on November 18-19. Given the NGO’s  focus on international technologies, on how international companies can work effectively in China, and on cross-sector and cross-border collaborations, Ms. Liu’s insights on this issue are invaluable. They underscore the need to work in China with a trusted group of partners who can provide relevant advice. Again, HelioFocus is a case in point: “It was a great advantage to have a local partner that can feel the market in real time and also that can challenge and try to understand potential questions to our product. It was a matter of understanding local language, culture; and having such an investor and supporter is a great advantage.”

With strength in technology acting as one of the key sources of added value for Israeli companies looking to enter China, some, like Amir Peleg, Founder and CEO of the Israeli-based TaKaDu,  wonders if the PRC is prepared for high-tech products. TaKaDu provides a Software-as-a-Service solution for monitoring water distribution networks.  During a conversation last month at their offices outside of Tel Aviv he asked, “Do they have data? Are they ready for us?”

At TaKaDu, a key concern about entering China relates to understanding customer incentives for purchasing the company’s product. Peleg wants to make sure his product fulfills a market need and to present his product in an appropriate way to potential clients. As such, he is taking his time: conducting in-depth market research and developing a well-honed entry plan that entails clearly outlined steps, from the first move on into the future. This is precisely what Wang advises based on experience. He saw standard foreign companies hiring people to do market surveys or statistical research, but not exploring the market from a hands-on, practical perspective. He argues that it’s better to distribute, test a product, and develop distribution channels, than to test a product’s applicability and review feedback from market. “Do this for 3 months. Make a batch and test: that’s a more practical way of doing things.”

Explains Wang: “Chinese customers…they’re not like what MNCs in Europe or the US know.” This is true especially when it comes to the concept of “losing face,” which means not doing anything that would insult or disrespect others by misbehavior. Such disrespect would lead Chinese business partners or competitors to lose faith or respect for the offender. In losing face, the opportunity to continue operating in China becomes threatened. Peleg thus believes it is necessary to take time to understand the context: “A lot people say, ‘let’s start doing business in China, let’s go!’ Actually, I don’t want to be a jumpy Israeli, but be kind of laid back. Not lazy; but rather: let’s learn, let’s listen, first.”

The Israeli government provides Israeli companies well-regarded services for market-entry support from the Israeli commercial attachés and Chambers of Commerce in Beijing and Shanghai, and through the Ministry of Industry, Trade & Labor. Israeli delegations to China exist for Israeli businesses to begin learning about China. They also act as “door openers” by providing information and introductions, thereby helping Israeli companies enter the Chinese market when it becomes desirable.

Opportunities for learning and engagement are expansive, and China’s market is in need of Israeli cleantech. As a result, the only challenge is getting started.

For more of Manuela’s columns and for other columnists, visit the Commentators and Experts section of the site.

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