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Chinese “coronatech” is coming

By Yasuhiko Ota, senior staff writer

 

During the Cultural Revolution, the Chinese People’s Liberation Army and its leader Mao Zedong followed the strategy of a “People’s War,” which, in essence, was to first control rural areas, surround the city, and attack the city with guerrilla tactics.

 

Aside from speculation whether or not that is what the current Xi administration actually has in mind, it is a fact that Japan is coming under Chinese influence, starting from rural areas and small-and-medium size businesses.

 

These days, a list titled “coronatech” has been circulating in Tokyo’s Kasumigaseki district, where many of the Japanese government agencies have their headquarters. This list has an overwhelming number of Chinese corporation names with products and services designed to stop the spread of the new coronavirus. This list was assembled to sound a security warning and urge Japanese companies to respond with their own technologies.

 

One example is Alibaba Group, which has developed an app that sends a person’s risk of infection to his/her smartphone based on payment record and location data. Another is an AI firm, Megvii Technology, which has introduced a technology that uses facial recognition to identify people who may have been infected.

 

Not quick enough to compete with China

 

There are numerous examples of coronatech that have already been put to use, such as identification equipment that lets you through the door without your touching any surfaces and high-speed AI that evaluates X-rays to detect the new coronavirus, etc., etc.

 

Chinese-style innovation involves collecting a large amount of data while that specific technology is being used in the market and updating software daily to achieve the standard and usability expected by users. Japan, on the other hand, aims to complete products before putting them on the market. Japan can’t compete with China in speed.

 

It has become increasingly clear in Japan which industries are vulnerable and can’t turn a profit in the pandemic. Chinese technologies first penetrate such “weak” industries.

 

For example, in the retail industry, a labor shortage and a slump in consumption have forced businesses to try harder to achieve automation and energy conservation. Iris Ohyama (Sendai City) recently marketed for those retailers AI-camera systems that identify the gender and traffic flow of customers, enabling the businesses to analyze their customers’ shopping habits. The machines came from Chinese companies.

 

In medicine, an increasing number of medical institutions have employed new technologies as well. For instance, a medical information service company, M3, Inc., and St. Marianna University School of Medicine have jointly launched a service that allows doctors and technicians to remotely read chest CT scans to avoid contact with the virus. The system is technologically supported by the Alibaba Group.

 

Chinese companies are making inroads into regional banks as well. Under the global pandemic, the Bank of Japan had no choice but to continue the policy of monetary easing, and regional banks are pushed further into a corner by difficulty in fund management and shrinking returns on loans. Those regional banks have turned to outside services that are too expensive to develop themselves.

 

SBI Holdings, which manages the SBI financial group, and a Chinese financial giant, Ping An Insurance Company of China, Ltd. (Shenzhen), now offer the regional banks 50 different services, including facial recognition, voice recognition, operational support, employee education, market analysis, and risk management/loan screening that are done using AI.

 

One might say that the regional banks are the region’s data treasure troves that include detailed information of area companies and individual customers. Small and medium-size corporations with advanced technology, government officials, policemen, and employees of nuclear stations have accounts with the regional banks.

 

The SBI stores these data by cloud service. The server is in Japan. President Hayato Koeda of SBI OneConnect Japan, a joint venture of the SBI and Ping An, insists, “All Japanese data will absolutely stay in Japan,” stressing perfect security preparations.

 

While it is useful..

 

Needless to say, Japanese companies are not trying to help Chinese firms to infiltrate Japan. Introducing technologies that have a competitive advantage is a rational decision and the natural behavior of businesses. SBI’s strategy will help improve the bottom lines of many regional banks, and products offered by Iris Ohyama and M3 will benefit Japanese consumers and users.

 

However, the conditions for those services must be put in place–namely, prevention of data leakage. A Japanese government official involved in security policy points out, “Relying on Chinese companies for system maintenance and software incurs high risk.”

 

The location of the server is not the only important point. Technicians could be the source of information leaks. If personal information of people involved in national security or infrastructure leaks, or key information of firms, there is a real possibility that Chinese companies will hand over the information to their government.

 

As a result of decisions made by individual companies, Japan as a whole may become part of the digital technology sphere centered on China to which data travel. Corporate profit motives sometimes run counter to the requirements of national security. The current pandemic appears to be accelerating the widening of that discrepancy.

 

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