The 2021 (22nd) Yomiuri Yoshino Sakuzo Award, which is given to outstanding works and papers in fields such as politics, economy, and society, was presented by Asei Ito, an associate professor at the Institute of Social Science, the University of Tokyo. It was decided to be an emerging country (Chuokoron Shinsha). What is happening in emerging countries due to the rapid progress of digitalization? What impact does that have on the US-China digital war, and what should Japan do? We asked Mr. Ito about the important issues of the award-winning work.
Digitization and the New "Distribution Revolution" Listener / Composition Junichi Maruyama, General Affairs, Research and Research Headquarters"Digitalizing Emerging Countries," which won the 22nd Yomiuri Yoshino Sakuzo Award, is an extension of the "Digital Emerging Countries Theory," which was contributed to the December 2019 issue of "Chuokoron-Shin." It was clear that the "US-China conflict" was a theme that attracted a great deal of attention from readers, but rather it took up another theme in the sense of broadening the horizons. That is the rapid progress of digitalization in emerging countries.
The US-China conflict is certainly an important issue, but if you compare it to soccer, it might be like "Dango soccer" where a large number of players flock around the ball called "US-China conflict". There are other important trends and issues in the world. Of the world population of 7.6 billion in 2018, emerging countries where 6.3 billion people live, excluding the member countries of the Organization for Economic Co-operation and Development (OECD) called developed countries, will be digitized.transfiguration I'm doing it. This book was written with an awareness of the problem of looking at digitalization from the side of emerging countries.
"Potential" and "Vulnerability" Amplified in Emerging Countries
The basic idea of the book is that digitization is deepening both in the positive side of solving problems in emerging countries and jump-through development, and in the negative side of the fluidization of the labor market and the socialization of surveillance. In emerging countries, there are major issues such as lack of credit and inefficiency, so the impact of technical solutions is also great. Just as mobile phones have become widespread without going through landlines, fintech services can become widespread without going through credit cards. On the other hand, negative problems such as surveillance nations and information control tend to become more serious.With the possibility of digitizationVulnerable The sexual impact will be greater in emerging economies than in developed economies.
It was once believed that digital technology would advance globalization and that digital would create a universal cyberspace. In reality, "each digitization" is progressing due to the systems and regulations of each country and region. In terms of information access, it is a phenomenon sometimes called "splitter net".
Digital technology makes us convenient, but it doesn't always take us to Utopia. It also has the negative effect of connecting to a surveillance nation and spreading fake news. Each country is still in the stage of trial and error, and the solution is how to draw out the good potential from the "potential" of digital, manage the various risks that digital poses, and compensate for the "vulnerability". Is entrusted to each. China is trying to create a digital society like China, and the United States is trying to create a digital society like the United States, but since the 2010s, emerging countries have become an important place for trial and error. That tendency will become even stronger in the 2020s. This is because more trial and error will be done in emerging countries as the population size corresponds to the number of Internet users.
The book proposes these hypotheses with the concept of "digital emerging countries." It is a form that uses the theory of emerging industrialized countries (NICs) with Singapore, South Korea, Taiwan, and Hong Kong in mind, as seen in the 1980s, in the digital age. In contrast to the NICs theory, the scope of the discussion of "digital emerging countries" is not limited to the Asian region. Rather, we should boldly remove spatial constraints and broaden our horizons.
"Southern Digitization for the South"
There is still no clear consensus on what perspective digital services should be analyzed. However, it is useful to take advantage of the service layer perspective. Digital services can be broadly divided into three levels. The first is the physical layer of storage devices, communication devices, base stations, and the like. The second is the middleware layer such as OS (basic software), and the third is the application layer that users finally use as a service. Emerging countries are generally launching various services in the third application layer. On the other hand, it is not easy for domestic companies to play a leading role in the more basic physical layer. With the exception of China, companies in emerging countries have little presence in terms of providing physical layer businesses and manufacturing communication equipment terminals.
This can be seen as the limit of emerging countries, but the potential of the application layer is great in that it can bring about innovations rooted in the lives of local communities and people. Crustal changes are being brought to the socio-economics of emerging countries, such as the shift to cashless payment methods, the spread of financial services that accompany it, and the streamlining of government and public services through the digitization of national IDs. Life in middle- and low-income countries, which make up the majority of the world's population, may change, and unique services may be cultivated from there.
As Thomas Friedman's The World Is Flat argued, computerization until the 2000s was a structure in which US white-collar work was outsourced to India. In other words, developed countries are markets and developing countries are subcontractors. It can be said that it is the informatization of the south (developing countries) for the north (developed countries). But now it's different. India presents a digital development initiative for India and China for China. In other words, "Southern digitization for the South" is progressing.
Focus of US-China conflict
Looking at the US-China conflict, the conflict is occurring in both layers, but the focus is on the physical layer. Emerging countries have vivid needs such as "I have limited income but want to have a smartphone" and "I want to reduce the number of crimes per day in urban areas". To do that, you'll need a smartphone device for under $ 200 and a sturdy and stable street surveillance camera system. As is clear from the 2020 smartphone global manufacturer rankings, the rise of Chinese companies is remarkable. Chinese manufacturers such as Huawei, Xiaomi, OPPO, Vivo, and Techno are lined up. For example, for emerging countries looking for smartphones under $ 200, manufacturers other than China are unlikely to be an option.
In China, there are also leading companies such as Alibaba, Tencent, and ByteDance, which operates TikTok, in the application layer. For example, if a Chinese company connects Thailand and China for e-commerce, Thai agricultural products can be sold in China. For emerging countries, it is very attractive to connect with Chinese companies even in the application layer. However, application layer services can be stopped at any time later, for example, as India went to TikTok (Note 1). On the contrary, the hardware of the communication system once introduced will continue to operate every 10 years. That is why the US-China conflict is fierce at the physical layer.
Who is meeting the needs of emerging markets
The Chinese government has announced the spread of hardware such as sharing satellite information and connecting optical fiber networks under the Belt and Road Initiative (Note 2). In 2017Xi Jinping The President of the People's Republic of China has stated that he will "connect the digital silk roads of the 21st century" in the seven fields of digital (Note 3). There is no doubt that China is incorporating its digital companies into the Belt and Road Initiative and using digitization as a leverage for the Belt and Road Initiative.
The Belt and Road Initiative has been criticized from the perspective of so-called "debt diplomacy" (Note 4), but most of it is conventional infrastructure such as ports, high-speed rail, and roads. In the digital field, the return on investment is easy to understand, and whether or not 5G is necessary, 3G and 4G communication networks are clearly needed. It cannot be denied that there is actual demand for communications there.
On the other hand, there are concerns that China has the National Intelligence Law, and important information may be extracted through the communication infrastructure. While some African government officials have expressed such concerns, emerging economies are adopting Chinese-made infrastructure because of the significant benefits of overcoming those concerns and concerns. A typical example of this is South Africa's President Cyril Ramaphosa's words, "Only Huawei can lead us to 5G" (Note 5). By looking at who is responding to the current needs of emerging countries, the US-China conflict can be seen from another angle.
The fundamentals (basic conditions of the economy) and industrial structure of emerging countries differ from country to country, and many countries choose the top by election under a democratic system. As for digitization, Chinese manufacturers have been selected as a result of multiplying the situation of each country by digital technology according to the current situation of each country. I think the influence of China's national strategy is overestimated.
Big government and digitization
There is a view that the reason why China's digital-related industry has become stronger is that it has promoted industrial policies that block the market and foster domestic companies. Certainly in China you can't access Google or Facebook. However, until the 2000s, Chinese and American companies were competing in the Chinese market. In addition, protecting the domestic market does not promise the emergence of innovative companies. Instead of seeing China as a protected black box, we should also look at fierce competition within it.
Due to the US-China conflict and the epidemic of infectious diseases, each country is making large-scale fiscal mobilization. In addition, on the digital side, intervention by the state is required and has become conspicuous from the viewpoint of regulation of platform companies and data regulation. Looking at infectious disease control, it seems that a larger government is required.
In the United States, the Biden administration is accelerating investment in the clean energy industry under the leadership of the state. The same is true in Europe. China has already begun to adopt a "two-circulation (bi-circulation)" strategy in anticipation of partial decoupling with the United States (Note 6). In light of these trends, "economic security" has come to be emphasized in Japan as well. The awareness of the issues in "Innovations in Economic and Industrial Policy" (Note 7) compiled by the Ministry of Economy, Trade and Industry also reflects these trends.
Now that the "fourth industrial revolution" due to digitalization has been advocated and the timing has come for new technologies to spread one after another, each country has a strong momentum to invest in new digital fields as important technological fields. Pandemics are also driving these moves. Digital technology that can avoid contact and robotics technology are used in various fields as measures against corona. The post-epidemic economic recovery of the new coronavirus has also been referred to as the "K-shaped". It refers to the situation where a department that achieves a V-shaped recovery and a department that heads to the bottom of the valley coexist. Digitization has been accelerated by the corona, but it can be said that it is progressing in a very distorted way.
Can Japan become a "co-creation partner" in emerging countries?
I don't have a good idea of how Japan should deal with digitalization in the future. But one thing is clear: Japan is not an "advanced digitized country" in the sense that it was an "industrialized country." The Japanese manufacturing industry has been supported by the accumulation of on-site know-how and long-term business relationships between subcontractors and cooperating companies represented by the Toyota Production System. In the background of "Japan as an industrialized country", there was clearly a mechanism to support it. However, Japan still has many challenges in terms of digitalization. Even if we take up the city of Tokyo, it is unclear whether it can be called an advanced city for social implementation.
Nevertheless, there are cases where the accumulation and know-how of Japanese companies are utilized in emerging markets. At the same time, the emerging nations that have been called "South" should broaden their horizons to the various trials and errors that are currently underway, set up antennas, and collect information with interest. It is necessary not only to take an approach of exporting and selling products and services from Japan, but also to sometimes learn a lot from new initiatives and services of emerging countries and return them to Japan. Therefore, the required approach is to become a "co-creation partner" in the digital age of emerging countries.
The speed of digitalization is fast, and it is not easy to grasp the movements of emerging countries. You may be worried that you may miss the ride just by raising the antenna. However, Japanese companies have many bases all over the world. If you devise it well, instead of doing it all the time in your daily operations, you should be able to get information at a low cost. How can Japanese companies join the options that emerging economies want? Persuading digitalization from the side of emerging countries leads to a clear and straightforward answer.
Of course, not only the positive side of digital technology, but also the cruel side will come out. If a terrorist builds equipment worth only $ 2,000, it is possible to build a drone that bombs a Russian military base. It is a phenomenon that is also called "democratization of air strikes." The problem of surveillance society is also becoming more serious. Japan may also play a role in developing rules for the development of artificial intelligence technology and cross-border transfer of data.
Profile Asei Ito Born in Tokyo in 1984. Graduated from Keio University Faculty of Economics in 2006. Completed the master's program at the Graduate School of Economics, Keio University in 2009. In 2014 he received his PhD in Economics from the same graduate school. In 2015, he was a full-time lecturer at the Institute of Social Science, the University of Tokyo. In 2017, he was an associate professor at the institute (~ present). His specialty is Chinese economic theory. His book is "Industrial Accumulation in Contemporary China" (University of Nagoya Press). Co-authored "Modern Asian Economics" (Yuhikaku Publishing). * This article was published in the "Yomiuri Quarterly" published by the Research and Research Headquarters. The Yomiuri Quarterly contains many other related articles and notable articles. The contents of the latest issue and the list of articles and articles published so far are summarized here.