The Chinese Government is considering ways to protect its business interests in the Middle East as escalating conflicts between Israel and Palestine show no immediate signs of easing.

"We would not adopt any immediate action yet, but necessary measures to safeguard Chinese engineering projects and workers there have been studied," Li Hongwei, an official with the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), told Business Weekly.

Declining to reveal details of the measures, Li said they would be put into effect in accordance with the situation development.

Experts worried that Chinese engineering firms doing business in the Middle East could be impacted by the heated conflict.

China plays a significant role in the contracted engineering market in the Middle East, with constructed projects valued at more than US$1 billion, and more than 10,000 Chinese holding work permits in Israel's construction and agricultural sector.

Trade volume between China and Israel kept two-digit growth in recent years, and hit US$1.3 billion last year, rising 24.8 per cent from the year before.

The rising volume has further increased the concern that China's strong censure against Israel's recent military incursions in Palestinian territory could impact the bilateral trade relationship.

But Wei Min, an expert with the China International Contractors Association, said the recent turbulence in Palestine does not extend to other Middle Eastern countries, thus its direct impact upon Chinese engineering projects in the region is not as great as might be expected.

"We have not received any report from our member enterprises that their business in the region has been influenced, but we will keep a close eye upon the development of the situation in the region," said Wei during an interview with Business Weekly.

The expert also said that as Palestine has long been a focus of conflicts, Middle Eastern countries, especially the affluent Gulf countries which are home to a number of Chinese overseas engineering projects, have developed a system to keep stability within their borders.

Ilan Mor, minister of the Israeli Embassy in Beijing, agreed, saying the conflict is unrelated to bilateral trade and economic exchanges.

"The trade and economic relationship between the two countries is complementary, and leaders of both sides are highly pragmatic on trade issues," Mor told Business Weekly. "I do not see any impact of the conflict upon the trade relationship."

Hundreds of Chinese workers hired in Israel had to abandon their jobs early this year as a result of the Israeli Government's new policy to limit foreign workers in the country.

The current disturbance in Israel could further impact its recession-hit economy, thus further reducing job opportunities for Chinese workers there.

Mor, though, argued that Chinese workers are highly competitive in terms of their quality and wages, thus the impact of the policy might not be as great as expected.

It is estimated that 300,000 foreign labourers work in Israel, legally or illegally, with a substantial number coming from China. The Israeli Government will reduce the number of foreign workers granted temporary work permits to 48,000, excluding those caring for the elderly.

Although the Chinese businesses in Israel and other Middle Eastern countries are not feeling pains from the ongoing conflict, experts said the fluctuating oil price and foreign currency rate caused by the conflict could pose a challenge to them.

The benchmark US light crude traded in Asia at US$26.8 a barrel yesterday, down from its high of US$28 last Thursday, when US President George W. Bush called on Israel to halt incursions into Palestinian territory.

But this could still lead to the rising prices of raw materials, increasing costs of Chinese engineering projects in the region, said Huang Hong, an official with China Railway Engineering Corp's overseas branch, which is building a US$200 million man-made island for the United Arab Emirates.

"The fluctuation in the currency exchange rate is a bigger threat to our costs," Huang told Business Weekly, adding his company has considered adjusting aspects of the project to avoid risks.

But Li from the MOFTEC said the changing oil price should not become a big problem.

"When signing contracts for the projects, engineering firms should fully take the possible fluctuation of oil price and currency exchange rate into account," the trade official said.

(China Daily April 10, 2002)