As the Xi Jinping administration continues its crackdown on IT companies and capital and talent flow out of China, Japan is being reassessed on the strength of its stable legal system and market safety. The key points are examined through the lens of China’s self-inflicted decline and Japan’s revival.
China has tightened regulation of IT companies, while the financial sector has seen a succession of massive fines and stronger regulation targeting major IT companies. To strengthen information controls and tighten the use of data, the government enacted three laws: the Cybersecurity Law, the Data Security Law and the Personal Information Protection Law.
These regulations have reduced the freedom available for technological innovation, including AI development, and accelerated the movement of global capital and talent abroad. Alongside capital outflows, a marked exodus of China’s highly talented engineers and researchers is under way as they seek freer research environments overseas.
Japan, meanwhile, is enhancing its appeal as a “safe asset” through political stability and adherence to the rule of law, and is being reassessed as a safe haven for assets. Continued long-term investment, including TSMC’s construction of a massive factory in Kumamoto, is another factor behind this trend.
Underlying this contrast is the fact that Japan’s system, founded on free markets and the rule of law, provides foreign capital with a stable environment that limits risk. The coexistence of China’s self-inflicted decline and Japan’s quiet growth may shape geopolitical and economic trends going forward.