Emerging Power v.s. The Old Guard

An Overview of China and Japan’s Technological Development in the 21st Century

Since the 1978 Reform and Opening Up policy, China has steadily opened up its market and enhanced its economic power. From 1978 to 2000, its GDP increased eight times. Since the beginning of 21st century, the country has experienced a further exponential growth. Meanwhile, Japan’s economy has been stagnating in recent years. In 2010, China first surpassed Japan in GDP as the second largest economy in the world.

China and Japan are not only top two leaders in East Asia but are also regional rivalries. Historically, the two countries shared a complicated history with Japan’s invasion of China during World War II. In the contemporary era, we can also observe the tension through their competition over regional politico-economic leadership. On one side, Japanese officials have been the president of Asian Development Bank since the time it was founded in the 1960s. ADB provides loans, technical assistance, grants, and equity investments to promote social and economic development for its 48 members in Asia and 19 members outside of Asia. On the other side, the emerging power attempts to assert its regional influence through new initiatives. In January 16th, 2016 China led the establishment of Asia Infrastructure Investment Bank. With 57 member states, AIIB carries a mission to be “a new multilateral financial institution to bring countries together to address the daunting infrastructure needs across Asia”.

Although Japan has experienced a slowdown in its economy in recent years, it still remains as a global economic power, which is largely achieved by its development in the second half of the 20th century. The Japanese economy enjoyed a long, sustained expansion after World War II, driven by a high rate of investment and efficient industrial techniques. Technology has always been a key comparative advantage of Japan—manufacturing has been the mainstay of Japan's economy since the 1960s; the electronics and car industries continue to dominate the sector, which has been very successful in penetrating international markets. Japan has the third largest electronics manufacturing industry in the world and is home to two of the top 10 semiconductor buying companies, Sony and Toshiba, which also are also top semiconductor producers and customers for semiconductor manufacturing equipment.[1] 

In addition, it was also ahead in the world in the early development of computers. Dating back to 1961, the first office computer was introduced in Japan Casio's TUC Compuwriter, NEC's NEAC-1201parametron computer, and Unoke Denshi Kogyo's USAC-3010. [2] In July 1981, computer companies, Shinshu Seiki and Suwa Seikosha, launched the first laptop computer in the world, HC-20. [3] These technological achievements were widely adopted by society.From 2000 to 2003, the percentage of households in Japan with access to a home computer increased from 38.6% to 63.3% while households with internet access increased from 34% to 52%. [4] As of the end of 2000, around 26.7% of all Japanese households own Net-compatible mobile phones. [5] By 2016, the internet penetration reached 94%, encompassing 118 million users. [6] 

Entering the 21st century, Japan remains a leader in technological innovation. Research and Development (R&D) consistently counts for 3% of the country’s gross domestic spending from 2000~2016. Even during the 2008 financial crisis, there was no change in the spending on R&D. [7] Meanwhile, China has been seeking transformation from its traditional low-valued added exports economic model to seek a new path. Since its entrance into the World Trade Organization in 2001, China has been leveraging its low-cost manufacturing industry as a growth engine.[8] Starting 2014, however, the exports have been experiencing decline and over the past five years, China’s economic growth rate has fallen from the historic double-digit rate to the current level of 6–7%.

      

To address the bottleneck of growth, the government proposed a new developmental strategy to restructure its economy and to achieve a “new normal” of slower but more sustainable economic development. One critical means to reach the “new normal”, according to China’s President Xi Jinping, through an emphasis on industry upgrade and technological innovation. [9] Historically, China has a weaker investment in R&D compared to Japan but it has been boosting its spending on R&D. In 2000, R&D only counted for 0.893% of China’s GDP, but the percentage has been steadily increasing. In 2006, the government set the goal to reach 2.5% by 2020 in its agenda of Medium- and Long-Term Plan for Development of Science and Technology (2006–2020) and renewed in 2016 in the 13th Five Year Plan on National Science. Meanwhile, the number of Internet users and computer owners have been increasing exponentially. In 2000, only 1.8% of the population had access to the Internet. In 2016, the number increased to 53.2%, translating into 731 million users, with 95.1% of internet users in the country used a mobile device to access the internet in 2016. [10] Although Japan’s internet adoption rate is still much higher, the sheer quantity of Chinese internet users makes it a gigantic market for all kinds of e-commerce opportunities in investments. The emerging power is catching up—China now owns the world largest e-commerce market while Japan ranks number four.[11] 

The proliferation of Internet is a hallmark of the major technological development for both Japan and China in the first decade of the 21st century. Both government initiatives and private sectors have been driving forces of Japan and China’s technological developments. In the next sections, we shall take a close examination of the core digital technologies that the two countries are betting on for the next decade and major players—both government and leading private sectors—that are shaping the landscape. 

 

[2] Information Processing Society of Japan. “Brief History.” Brief History-Computer Museum, museum.ipsj.or.jp/en/computer/office/history.html.

[3] Information Processing Society of Japan. “Personal Computers” Brief History-Computer Museum, http://museum.ipsj.or.jp/en/computer/personal/0081.htm

[4] COMPUTER AND INTERNET ACCESS BY HOUSEHOLDS. OECD, 2005, COMPUTER AND INTERNET ACCESS BY HOUSEHOLDS, www.oecd.org/publications/factbook/34416149.pdf.

[5] “Japan Internet users up 74 percent.” CNN, Cable News Network, edition.cnn.com/2001/BUSINESS/asia/04/24/tokyo.netusersup/index.html.

[6] See [4]

[7] https://data.oecd.org/chart/4Ygn

[8] Jing Zhang & Jian Chen (2017) Introduction to China’s new normal economy, Journal of Chinese Economic and Business Stu ies, 15:1, 1-4, DOI: 10.1080/14765284.2017.1289454 

[9] Xi, Jinping. Xi Jinping guan yu ke ji chuang xin lun shu zhai bian. Zhong yang wen xian chu ban she, 2016, fuwu.12371.cn/2016/12/13/ARTI1481593613983421.shtml.

[10] 第39次《中国互联网络发展状况统计报告》 China Internet Network Information Center.

[11] “10 of the Largest Ecommerce Markets in the World by Country.” Business.com, www.business.com/articles/10-of-the-largest-ecommerce-markets-in-the-world-b/.2017