TOKYO (Reuters) – Japan could effectively block China from providing drones to its government to protect sensitive information, according to six government officials and the ruling party familiar with the matter, as part of a broad effort to strengthen national security.

The main concerns, these people said, centered on information technology, supply chains, cybersecurity and intellectual property – concerns that have also been growing outside of Japan.

But Japan must balance those fears — particularly Beijing’s growing pressure to export sensitive technologies such as commercial drones and security cameras — against a deep economic dependence on China.

He must also navigate increasingly choppy waters between China and Japan’s closest ally, the United States, which is at odds with Beijing on many issues, including technology.

“China is a big market and it is important for Japan,” said one of the senior government officials. “On the other hand, there are fears that advanced technologies and information will leak to China and be diverted for military purposes.”

The Ministry of Defense has several hundred drones, including some made by Chinese companies; the coast guard has about 30, and most are Chinese. Both said they do not use Chinese drones for security-related issues. Other government entities also use such drones.

It’s unclear whether all of them should be replaced, but the new drones, used for sensitive work such as criminal investigations, infrastructure work and emergency rescues, should be protected against data leaks and go through stricter verification procedures, according to the revised policy.

The tightened rules, which are due to come into force in April 2021, do not mention any country by name. But senior government and ruling party officials told Reuters they were created with China in mind.

The initiative includes new investment rules for foreigners enacted last year; Ruling party lawmakers are also preparing a comprehensive bill to promote economic security that will be unveiled this year.

Separately, Japan’s National Security Council set up a unit in April to examine how economic issues, such as advanced technology, could affect national security.

BUSINESS OPPORTUNITY

Domestic drone manufacturers expect to benefit from these changes, as they mean government departments will most likely do their home drone shopping.

A Japanese drone maker, Tokyo Aircraft Instrument Co., Ltd., has developed a drone with a camera that can fly in strong winds – making it ideal for monitoring damage after a disaster – and the company is discussing potential applications with the government.

“The drone platform, flight control system and radio communication equipment are all domestically manufactured, and it is our unique model based on our years of experience in avionics components,” Kazuya said. Sumida from the company’s drone division. “We plan to further improve the safety of the drone’s information and communication functions.”

Admittedly, government sales make up a small portion of the domestic drone market, which stood at 140.9 billion yen ($1.35 billion) in the fiscal year to March 2020, up 51 % compared to the previous year, according to the Impress Research Institute. The market is expected to reach 642.7 billion yen in the fiscal year to March 2026.

But the goal isn’t to boost local drone makers, proponents of the measure say — it’s to keep Japan safe.

“Japan will maintain diplomatic relations with China but we will respond more carefully to sensitive technologies and information,” another senior government official said.

Analysts say the United States cannot completely cut out China either, as it would hurt the US economy.

“I think the allied nations will discuss critical technologies, especially information and technologies that could give China a military advantage,” said Tsuneo Watanabe, senior fellow at the Sasakawa Peace Foundation.

Japan has already set aside around 300 billion yen to diversify its supply chains and reduce its reliance on China by bringing production back or expanding into Southeast Asia.