Japan's business community remains optimistic about China's economic prospects, pointing to rapid advances in artificial intelligence and the digital economy as new drivers of growth.

China's 2026 Government Work Report calls for building a "modernized industrial system", fostering emerging industries such as "integrated circuits", and expanding the "AI Plus Initiative" to accelerate the large-scale application of AI and other digital technologies.

Yangchoon Kwak, a professor at the College of Economics at Rikkyo University in Tokyo, said China has made technological innovation a key pillar of its industrial transformation in recent years and has achieved notable progress in several sectors.

In the new energy vehicle sector, China has built a large market and continues to strengthen its competitiveness in battery technology and the broader supply chain, he said.

The country's automobile production and sales both exceeded 34 million units last year, reaching record highs, according to data released in January by the China Association of Automobile Manufacturers.

New energy vehicles were a major growth driver, with production and sales both surpassing 16 million units and rising by about 30 percent year-on-year. China has ranked first globally in new energy vehicle sales for 11 consecutive years.

While China's semiconductor industry still faces challenges, investment in research is expanding and technological capabilities are gradually improving, he added.

Major drivers

Kwak believes China's rapidly growing AI and digital industries are likely to become major drivers of the country's economic growth in the coming years.

The Japan-China Economic Association also sees strong potential in emerging technology and consumer sectors, noting that China maintains a leading position in digital technologies.

Amid ongoing restructuring of regional supply chains, the association agrees that China remains an indispensable participant, playing a central role in East Asia's manufacturing and supply chains.

Kwak said that although some countries have advocated diversifying supply chains, China remains a key hub in East Asia's manufacturing network.

"With its vast domestic market and steadily upgrading manufacturing capabilities, China's central role in regional industrial chains is likely to remain unchanged for the foreseeable future," he said.

Japanese economic circles also stress the importance of stable economic ties between Japan and China.

Since last November, provocative remarks by Japanese Prime Minister Sanae Takaichi on China's Taiwan have heightened tensions in Sino-Japanese relations and negatively affected economic exchanges between the two countries.

The Japan-China Economic Association voiced regret that its annual joint business delegation to China — which started in 1975 — could not take place this year.

The association noted that cooperation platforms such as the Japan-China Energy Conservation and Environmental Protection Forum remain important channels for economic collaboration.

Looking ahead, the association said the two countries still have ample room to cooperate in addressing global challenges.

Beyond decarbonization efforts and the digital economy, areas such as healthcare, elderly care, social welfare services, and disaster prevention could also become important areas of collaboration.

Commenting on China's efforts to expand opening-up and improve the business environment, Kwak said continued progress would provide Japanese companies with a more stable investment environment.

He said that China remains a vast consumer market with growing demand for high-quality products and services.

Potential growth areas include green energy, the digital economy, AI, and healthcare, which could also offer new opportunities for Japanese companies.

"Rather than drifting toward confrontation, Japan and China should deepen cooperation in these areas and work toward a more balanced and mutually beneficial relationship," Kwak said.

houjunjie@chinadaily.com.cn