Cyber capabilities are now a potent instrument of national power. This fact was dramatized last month when hackers shut down the Colonial Pipeline, which supplies almost half of the motor fuel consumed on the U.S. east coast, for five days. The hackers, according to U.S. officials, were from a Russian ransomware group named DarkSide, which successfully received payment from U.S. authorities.
The case represented one of the most visible recent examples of the mushrooming phenomenon of cybercrime. But it should also be recognized that state actors -- as well as crime syndicates -- are ramping up cyber capabilities to engage in gray zone warfare.
A new study published this week by the International Institute for Strategic Studies (IISS), a London-based think tank, said that China is on a trajectory to reach parity with the U.S. as a "tier one" cyber power about a decade from now.
Japan was ranked as a "third tier" cyber power alongside India, Indonesia, Malaysia and North Korea. Nevertheless, the report said, Japan is the most likely country to graduate in coming years to "second-tier" status alongside China, the U.K., France, Canada, Australia, Israel and Russia.
The IISS made the rankings based on assessments of seven different criteria, including cyber intelligence capabilities, cybersecurity and resilience, offensive cyber capabilities and global leadership in cyberspace affairs, as well as considerations such as strategy and governance.
The issue of cyber power is important, the IISS report said, because state and private actors are able to use their prowess to obtain secrets from each other, steal intellectual property, threaten to disrupt financial institutions and utilities and, in wartime, disrupt military capabilities.
"The [IISS] takes the view that U.S. digital-industrial superiority, including through alliance relations, is likely to endure for at least the next 10 years," the IISS report said. "[But] with its current trajectory, and providing it addresses its weaknesses in cybersecurity, China would be best placed to join the U.S. in the first tier."
The specific weaknesses that China suffers in its cyber capacities are mostly twofold. It does not have a U.S.-style cyber-industrial complex with input from universities, industry and government. Second, China would need to improve its educational outcomes in cyber sciences, including cybersecurity, the report said.
Nevertheless, a range of impressive Chinese tech companies and an online population of around one billion means that China has immense residual cyber strength and dynamism. The scale of the country's value-added digital economy reached 35.8 trillion renminbi ($5.1 trillion) in 2019, representing an industry big and lucrative enough to drive strong corporate innovation.
In areas of broader scientific endeavor too, China is making strong headway. It has about 410 satellites in orbit, including a network of Beidou satellites to guide its missiles. It recently finished laying some 4,600 km of quantum communications cable, a new technology which -- in theory at least -- provides for unhackable telecommunications.
Japan also has the advantage of a leading high-tech industry, with 10 of the 51 tech and telecoms companies in the 2020 Fortune Global 500 list -- a total that puts it ahead of China and western Europe and second only to the U.S.
Where Japan cedes ground in the IISS rating system is in cybersecurity, an area in which constitutional constraints have prevented the development of an offensive cyber capability, according to the IISS report. There are signs that this could change, the report added.
Cyber capabilities are becoming an increasingly fraught arena in international relations. The U.S. and China have traded barbs recently, with Beijing calling the U.S. the "world's top hacking empire" after allegations that American intelligence agents used Denmark's underwater cables to spy on top European officials.
German Chancellor Angela Merkel and French President Emmanuel Macron said they expect an explanation from the U.S. and Danish governments.
"As facts have proven time and again, the U.S. is the world's top empire of hacking," Chinese foreign ministry spokesman Wang Wenbin said in early June. "With targets including not only competitors but also its allies, the U.S. is a real master of large-scale, indiscriminate tapping and theft of secrets."
U.S. officials, meanwhile, have accused Chinese state-backed hackers of pillaging huge amounts of American intellectual property in numerous attacks, such as several by a squad called APT10, which targeted US companies in finance, telecoms, consumer electronics, medical industries and defense.
James Kynge is editor of #techAsia, a newsletter on technology in Asia that combines the best reporting from Nikkei and the Financial Times. He is also the FT's Global China editor, writing about China's growing footprint in the world, and won the Wincott Foundation award for the U.K.'s Financial Journalist of the Year in 2016. His prizewinning book, "China Shakes the World," has been translated into 19 languages.