Israel's increasing defense cooperation with China has caused concern in the United States, which is the largest foreign supplier of military equipment to Israel.

The United States has pressured Israel against selling sophisticated equipment and technology to China.

In 2000, Israel cancelled the sale to China of the Israeli-built Phalcon Airborne Warning and Control System (AWACS) in the wake of pressure from the U.S., which threatened to cut off US$2.8 billion in yearly aid if the deal went through.

But now things have changed.  The Israeli economy from top to bottom has profited by selling technology to the US Department of Defense for years.  This has now changed.

Research grants are drying up.  For instance, the national Science Foundation as cut up to 600 grants; grants which have a major effect on joint Israel/US cooperating.

Research and Development funding for critical military technology has been cut by 6,424,000,000 US Dollars.  This leaves the Israeli Military Industries in a situation, which they have never experienced before: slow starvation.

Over the past several years, planned DOD spending has been significantly reduced

• by the following actions:
• To comply with the original discretionary spending caps in the BCA, FY 2012 enacted appropriations and the FY 2013 President’s Budget reduced DoD funding by $487 billion when compared with the ten-year plan in the FY 2012 President’s Budget.
• The March 2013 sequestration reduced base budget FY 2013 DoD funding by an additional $32 billion.
• Consistent with the revised caps in the BBA, FY 2014 enacted appropriations reduced DoD funding by $31 billion compared with the President’s Budget request, and the FY 2015 President’s Budget requested $45 billion less than was planned in the FY 2014 budget.
• Together, these cuts total almost $600 billion. (source UNITED STATES DEPARTMENT OF DEFENSE FISCAL YEAR 2015 BUDGET REQUEST )
•  

There seems to be no end in sight any time before 2018.  Israel is not blind to the fact that this previously critical market is drying up.  So, understandably, Israel is looking  East.

Israel is now China’s second largest arms supplier after Russia. Moreover, advanced technologies have been sought by China and sold by Tel Aviv against U.S. wishes.  The US fears that these some of these technologies may have gone beyond the tolerated civil defense technologies grudgingly permitted by the US.

Let us look at what Israel has to lose if she curtails her relationship with the People’s Republic of China to satisfy American demands:

• China is Israel's third largest trading partner.  Trade volume increased from $50 million in 1992 to over $10 billion in 2013.
• Prime Minister Binyamin Netanyahu visited China in May 2013 and five agreements were signed during his visit.  The G2G (Government to Government) mechanism was established and five task forces were set up in high tech, environmental protection, energy, agriculture and financing.
• Israel sold arms worth US$4 billion to China in this period.  China has looked to Israel for the arms and technology it cannot acquire from the United States and Russia.  Israel is now China's second-largest foreign supplier of arms (following Russia).
• China has purchased a wide array of military equipment and technology, including.
• In August 2012, with Sino-Israeli trade growing, the University of International Business and Economics in Beijing set up a department dedicated to studying Israeli economics and Judaism, while some Chinese universities began offering Hebrew courses.
• Since 2013, Chinese investors have begun to show a growing interest in Israeli firms

Economy Minister Naftali Bennet said Israel was "going east"; telling a high tech conference Asia had overtaken the U.S. as Israel's second largest export destination after Europe.  "We are shifting our economic resources to Bangalore, Africa and China, China, China," he said.

Tel Aviv University and Tsinghua University of Beijing launched a $300 million joint center for innovative research and education, with Chinese Vice Premier Liu Yandong coming to Israel to mark the event.

"China has full confidence in the prospects for our relations," she told a Tel Aviv conference that attracted over 350 delegates from China.  "We believe we have a lot to learn from Israel, which is well-known for its innovation."

Agreements were signed this week between Israel and China promoting bilateral research and Israeli companies' participation in innovation parks in China.

China was particularly interested in mobile, Internet, biotech, medical and agricultural technology, he said.

 “China is Israel’s largest trading partner in Asia, and looking ahead, it seems it will soon become Israel’s largest trade partner in general,” said Netanyahu.  China will replace the U.S. as the biggest trading partner as of last year.  He continued, “We admire China and are confident that Israel has made a contribution in these connections.”

In light of the sequester and its effect on the Israeli Military Industries, efforts are now being made in Israel to find ways of sharing defense technology as well as innovated technologies  in pollution mitigation, education or farming without alienating the United States.

However, the U.S is keeping an eye on this Israel/China economic development, and has even expressed worry that Israel may have already provided China technologies, which may threaten US forces in the Pacific if there is a conflict between them.

America is seemingly telling Israel, to paraphrase the song written by Michael Buble:

You can dance – every dance with the guy

Who gives you the eye, let him hold you tight

You can smile- every smile for the man

Who held your hand neath the pale moon light

But don’t forget who’s takin you home

And in whose arms you’re  gonna be

So darlin’ save the last dance for me