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With China likely to have been the only major country to achieve positive economic growth in 2020 amid the COVID-19 pandemic, fears are mounting that Japan will fall further behind the world’s second-largest economy, particularly in digital technology.

Some foreign affairs experts are optimistic on China’s rise in the digital field, saying it will provide commercial opportunities for Japanese companies — many of which have been bolstering their business relations with Chinese firms.

Others, however, have warned that unless Japan makes serious efforts to promote its own digital competency as a national strategy, the world’s third-biggest economy could be swallowed up by China’s more influential platform in the not-so-distant future.

Although Prime Minister Yoshihide Suga has pledged to make digitalization a top policy priority since taking office in September, he has yet to yield visible results as he has had to concentrate on steps to contain the virus crisis.

China’s economy is expected to “gain momentum in 2021 with domestic demand bouncing back from the coronavirus shock,” probably allowing the Communist-led nation to spend “huge money” on developing digital technology, a diplomatic source in Beijing said.

In contrast, Japan’s economy “may not recover sharply,” he added, given that the virus has rapidly spread in the past few months at home, forcing Suga’s government to issue a state of emergency for several regions that restricts economic activities on a mass scale.

In China, growing numbers of new infections peaked in late February 2020 on the back of the country’s hard-line “zero corona” policy approach. Japan’s request-based “with corona” policy has so far apparently failed to curb the spread of the virus.

While Japan may struggle to prop up its virus-hit economy this year, China is set to try to strengthen its digital infrastructure and capitalize on it as a driver to expand its exports, a key engine of economic growth, the source said.

“Even now, Japan can’t hold a candle to China in terms of digital technology. If Japan can’t catch up, the course of its digital transformation could be dominated by China,” he added.

China registered 2.3% year-on-year economic growth in 2020, government data showed Monday, with the International Monetary Fund having projected that Japan, the United States and the eurozone would have experienced a contraction last year.

During the October to December period, China’s gross domestic product grew 6.5% from the previous year — posting the third straight quarter of expansion — after shrinking 6.8% in the first three months of 2020.

With the broader economy recuperating, China has reportedly planned to invest 10 trillion yuan ($1.54 trillion) for five years through 2025 in development of digital-related technologies such as artificial intelligence, 5G networks and quantum computers.

Large-scale quantum computers could theoretically solve certain problems faster than conventional ones, making today’s encryption systems commonly used to protect digital information vulnerable.

China’s quantum computer technology has “come close to” that of U.S. internet giant Google LLC, a front-runner in the field, said former Bank of Japan Deputy Gov. Kazumasa Iwata, currently president of the Japan Center for Economic Research.

As the pandemic has highlighted the significance of being able to conduct activities without contact, through approaches such as telemedicine and online education, China may also accelerate provision of its digital services to other nations, said Yoshino Tamai, a senior economist at the Mizuho Research Institute.

In early 2020, the Chinese government introduced a health code system that can indicate whether a person has a high risk of infection. The leadership of President Xi Jinping has been attempting to pitch the technology to the world.

The system assigns residents multicolor QR codes that can be used to register where they go and determined whether they have come into contact with infected patients. When the codes are displayed in green shown on their smartphones, they are permitted onto trains and expressways, and into shops and office buildings.

China’s central bank, the People’s Bank of China, has already begun trials of its digital currency in specific areas since mid-2020, paving the way for it to become the first country to establish a national electronic payment system.

Central banks in Japan, the United States and Europe have been vigilant of China’s lead in issuing digital currency, as it could threaten the long-standing position of the U.S. dollar as an international reserve currency, analysts say.

Japan, meanwhile, has clearly been one lap behind China in the digital arena.

For example, when cash handouts, aimed at cushioning the impacts of the virus, started to be offered in May last year, online applications were launched. But the inconvenience of the process prompted many local governments to accept only mail-in applications.

Until recently, hospitals in some prefectures were believed to have reported new novel coronavirus cases to municipal authorities by fax after completing paperwork by hand.

In 2020, Japan ranked 27th among 63 economies in digital technology competitiveness, while China placed 16th in the global ranking released by the International Institute for Management Development, a business education school in Switzerland.

“Only China can bring the virus under control and maintain a high economic growth rate in 2021,” wrote Yukio Noguchi, an adviser to Waseda University Institute for Business and Finance in Tokyo, in a post on Twitter.

China’s advances in state-of-the art technologies “might continue,” Noguchi noted, adding that there may be a need for democratic nations to challenge it in the future.

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