 This is Think Tech Hawaii, Community Matters here. Yes, we're back on J. Feidele. This is Think Tech. And this is, what is it? Think Tech Asia is what it is. And we're studying Asia as we must because we're in the middle of the Pacific and we are affected by, we are a part of all these events that take place in defining the Pacific region. You know, there's a book. My name is Pacific by Simon Winchester. He used to teach at the East West Center. It's a very interesting book. It's anecdotal in the sense that he has about a dozen stories of things that have happened in the Pacific going back when, from the war on forward. And he tries to tell you to find what the Pacific is. Because the book is written about three years ago. He understood about the South China Sea, by the way. He understood. Anyway, if you were to write that book today, today, you would have another anecdotal story in there. It would be about technology. It would be about China's technology revolution and how it affects the Pacific and how it affects us, how it affects the U.S., how it affects the world. And Russell Liu, my inimitable co-host here on Think Tech Asia is here to talk to us about that, about the technological revolution in China and how it affects us and the U.S. in general and the world and how we better watch what's going on in China. Welcome to the show, Russell. And I'm glad to be back, Jay, back from China. And today's show is going to be fascinating because we're going to talk about something that is very special. There's a revolution going on in China. It's a good one. And that revolution is going to change not only China, but the world. And how does it apply to Hawaii? Where can we position ourselves? These are really lessons that are very timely today. So what's happened in China? I mean, there's something remarkable happening. First, we see China stand up. Deng Xiaoping, right? He said, let's be a player on the world economic stage. And presto, China was. China was manufacturing everything for everybody in every continent. But then things changed. Now, as of a couple of years ago, I guess it was Xi Jinping or maybe his predecessor, his predecessor. Hu Jintao. Hu Jintao decided we're going to have a consumer economy just like the United States. We're going to find technology to make the consumer market. We're going to consume our own goods instead of relying on selling into other places. And by George, they have done that. Part of that change is the technology. And you and I, especially you, have seen China do some very innovative things. So rational, so mindful, so using the technology. It's happening right now. So can you describe what life is like in the consumer technology in China? Well, we have this word we call a digital age. What's a digital age? Yeah. And you're starting to, if you go and Google the internet today, you'll find headlines all about China's being the leader in digital age. What is a digital age? Well, you know, when you think about it, digital age means technology that is changing the lives of everyday citizens, transforming the society. You know, 30 years ago, if you go and store in China, you'll see the shopkeeper with an abacus. Today, that abacus is no more. You're seeing people with smartphones. It's a society that's ramped up through technology, making digital payments. You're seeing the convenience. Nobody carries cash today. Nobody carries credit cards. Mastercard visa? Who cares? You don't carry plastic cards. So when I'm out at Bikki, I'm looking at the bikes, they said slip your credit card in. They've refrogged above, beyond credit cards. Opho. Opho. Opho bicycles, right? They use scanned QR codes. They're digital. It goes into e-commerce applications through WeChat. WeChat Pay, Alipay, Bingo. The bank sends the money to a vendor. It's gone. The deal is done. Cash flows and moves quickly. The society moves. And so all this is happening because China has made a big move to change its old economy in the 70s and 80s. We're looking at China as being the garage mat for manufacturing society, slippers, sandals. Umbrella's are made in China. China made a conscious decision. We're going to move up the value chain. We're going to do something where we know that we have to do something that's going to sell our economy. What it's done is it focused on innovation, technology. And so people were laughing. The West was laughing a couple of years ago. We don't think they can do it. But today it's different. They did it. They did it using technology. And they're still doing it. And it lubricates the daily transactions of our lives, make them faster, easier, and more of them. And so the result is they have achieved this new paradigm, this new consumer economy, focusing on technology, like that QR code thing. Yes. And the beautiful thing about Jay is that, remember, everyone in China, you can be in Xinjiang, China, Guangzhou, China, Beijing, Shanghai, Guilin, Chengdu, and you have the same application. You can get services. You can get goods. How about the country? How about the country? The country's stabilized. You know, people are happy. How about the country? Way back. Way out. Way out towards the Gobi Desert. I mean, they still have this technology. They still have the technology because it's the internet. They've got internet. And the last 10 years, 20 years, China has made a conscious move, invested in the logistics, invested in high-speed rail all across the country. So it is amazing what it's done. It's allowed small businesses to grow, the backbone of any economy. It's allowed big businesses to grow, and it's allowed people to convenience. But you know, digital age. So what are we talking about? Let's take a look at a quick video of what's it like. An everyday person, this is going to the food stand in Beijing to get a glass of watermelon juice. Watermelon juice. Okay, it's a famous watermelon juice video. Here we go. Okay, we're back here. We're at a point of purchase. And what it's looked like, it's fresh watermelon juice already to go. So we are going to now show you how we will pay. And I will simply get my WeChat. Open your WeChat. This is the plus button on the top. And all you do is click scan the code. And then you scan the code. You just scan the code. And then you can enter the amount of money you need to pay. And how much do you cost, yeah? So it's 56.5 for all these wonderful drinks. I press this. And the green button is like pay. It's processing. Now it's pay now. I hit pay now. I touch my thumb frame for my ID. It verifies it. Up to then. And it's paid. That's all it's done. No cash. Money. Simply transfers. To your account. From my account. Automatically. So now we can all join the Watermelon Juice. Thank you very much. Another episode from CTECH Global. Live Beijing. Russell Leo and my guest here. Sorry to keep you. Russell, the watermelon juice looked pretty good. I know. I was just about to comment. We could use a glass of water just right now. That's very refreshing. So I mean this is remarkably easy. And I've got to think about it. Think about each step, each frame of that 90-second video. What you get is a system that is much easier than a credit card. It's a lot easier. And it's a cashless society. And the good thing about it is that two things that are important from a microeconomic point of view. Development of small businesses. Who can now get consumers coming in. They don't have to worry about counterfeit money. People have more of an urge to spend. Consumer spending. Convenience of it. And also the money is transferred. They're going to be counting the banks instantly. No question about collectibles. And the government can figure out the taxes. So it's a site that works for everyone. And the growth of small businesses. And it's sort of like they call it China. China Dream. And it's amazing when I come back to the U.S. I've got a bumble for my cash. Oh, I don't have enough cash. It's an old system. So my question is we need to take a critical look because these are the platforms that are changing the world. And it's because the Chinese are going outbound and are spending a big lot of money. And the majority of the global financial knowledge they're looking at China. One out of every three startup. A knowledge startup. That's over a billion dollars. It starts in China. And that's big money. Well, I don't think we've been watching carefully enough. I mean, I don't think this administration fully understands the power of innovation. And we've been going backward lately. This makes it even greater stark relief to compare what's happening in China and what's happening here now. We're losing ground and they're gaining ground at a very rapid rate. Well, that's why it's a paradoxical because in the U.S. we're talking about making America great. We're talking about bringing hard manufacturing jobs to communities in America. But let's face it, you know, things are changing. The money is being made in financial services and technology. And factories in China are all automating and robots. They're being outsourced to other places in Asia. That's right. And so again, we are. Are we slipping back today? Where we're in the curve? And it makes me question because the institutions upon which the banks to rely on here, you know, they have their way of doing things. But we're not buying into technology. It means that we're going to be behind because around us the Chinese are spending a lot of money and they're going around the world. Yeah. Well, I mean, you know, the local banks in Hawaii, they do not have great internet technology, online banking and all that. And they're cut well below the average city bank. I mean, big city bank on the mainland. But those banks are cut below what's going on in China. And we're just not into innovation. And in this administration, we're going backward as fast as we can. Instead of getting away from coal, which is China's target, we're going to coal. What? What? It's backward. And so many other things like climate change. But, you know, I want to talk about, you know, this whole new paradigm of the cashless society and the QR code. First of all, let's understand, you know, the mechanics of it. So I am flashing my camera, my cell phone camera on a QR code. Okay, my camera reads the QR code. How does the shopkeeper, the guy with the watermelon juice, know that he has been paid? It'll show my application as they transfer me success. On your phone? On my phone. And he will also see it on his digital side, the technology. Oh, he'll see the same thing. Yeah, some of the registers are tied in that way. Also, they have their own scanners. And I have my own QR code. And for example, WeChat pay. I have my special QR code. Oli pay. I have my special QR code. And they will scan mine. And that QR code that I have is tied into my bank so that money is automatically transferred. And it's amazing because I'll tell you a little story the other night. I was asking a friend who's coming from Beijing to, they're going to visit here. And I asked, can you get a pair of yoga socks for your wife, cheaper in China? And she said, OK. She went on the Chinese internet, e-commerce. And I sent her the link that I purchased earlier. She ordered it. And she sent me a WeChat miss saying it costs 64 RMB. And I said, great. And so I take out, I mean, here in the US, in Hawaii, I take out my WeChat. I find her WeChat pay account. And all I do is I say, hey, I'm going to transfer. This little button says transfer. You're in the US. In the US. And I transfer. And I type in 64. And I hit Enter. You have just paid. I've just paid. And it's chosen her in. And guess what? She sends a message three seconds later. It says, received. Thank you. And see, this is why I'm saying it's not China. It's global effects. It's going across. Chinese are traveling across. They're coming to school here. They're buying things. And that's where it is, the beauty of it. It's a global thing. And so where are we in this old scheme of things? But now let me go back to the mechanics for a minute. So the class of watermelon juice costs what? Two kwae, three kwae, four kwae? Oh, it's fresh watermelon. I had about four or five cups for the crew there. So it was 60-something kwae. 60-something kwae. So what did that come to? Well, maybe about $2. $2. Okay. So suppose I wanted to buy something for $500 or $1,000 or $5,000. Can I use the same system? You can use the same system. Is it safe? It's safe. You know, I've actually, I did some research on it. And it's so far, there are some problems, but overall, it's been pretty safe. And they work it through the e-commerce vendors, Alibaba, Alipay. Oh, so when you want to buy things like, Alibaba's like Amazon, yeah? Mm-hmm. You can buy all kinds of things using this very same QR system. You can buy them. Yes. Because it allows all these vendors. You don't have to have brick and mortar. You don't have to have an Alamone Shopping Center. You could be in the far-reached Mongolia, inner Mongolia in China, or something. And you'll get in two days. And a little story. At the university where I teach law, the basement of the university, small shops, there's a guy who has a little bakery. And his baker is from Mongolia. And she makes black forest cake. She makes New York cheesecake. And you would think, well, where in the world is this guy going to get people who are going to come in here and order the stuff and have a cup of cappuccino? Yeah. What he does is at two o'clock in the afternoon, all the orders come in through Alipay or WeChat. Yeah. People have ordered it. So they're baking it. And it's the cheapest overhead. They have a smaller bakery with a little shop. They bake it. Next morning, it's lined up the boxes. And the delivery people come pick it up. And they send it all across Beijing. So what you're saying is that the amount of capital you need to start a business like that is minuscule compared to what it would be, say, in this country. Yes. You can put it together in no time at all. And it reminds me of something I think was on 60 Minutes. We've talked about this before about a woman who was retired. She decided she liked cooking. She decided she was going to be a caterer person. And so she would take email from her customers. She would cook in her own kitchen at home. She would trundle off on the street with a little wheelbarrow affair. She would visit their homes. They would do the QR code transaction. And she had a job with virtually no investment at all. Now she had a nice job business, if you will, only because she was using her telephone for these transactions. It was quite remarkable. So it's really remarkable because, you know, no matter what you say, the world is changing the internet locally. Bank of Hawaii. I noticed the war branch is closed. I noticed a lot of locations have downsized because, and I've heard about some ad talking about the bankers are studying e-commerce. And that's the world, the digital world. But the question is, where are we? Are we our masters of our fate? And I really think we need to take a hard look at it. Okay. And when this break is over, when we come back from this break, Russell, we are going to take a hard look at it. We're going to discuss step by step how it can be done here in Hawai'ine. We'll be right back after this short break. Russell, you. This is Think Tech Hawai'i. Raising public awareness. Living in this crazy world. So far up in the confusion. Nothing is making sense for me. Grandmother, what big eyes you have. She said, What are you doing? Research says reading from birth accelerates our baby's brain development. Push! Read aloud 15 minutes. Every child, every parent, every day. Aloha! My name is Steven Phillip Katz. I'm a licensed marriage and family therapist. And I'm the host of Shrink Rap Hawai'i, where I talk to other shrinks. Did you ever want to get your head shrunk? Well, this is the best place to come to pick one. I've been doing this. We must have 60 shows with a whole bunch of shrinks that you can look at. I'm here on Tuesdays at 3 o'clock every other Tuesday. I hope you are too. 3, 8, we're back. We're back. We're live at Resolu, an American lawyer practicing in Beijing, and having a wonderful time examining the, what do we call it, the arbitrage of technology between China and Hawai'i and the U.S. And so, you know, what makes it so successful in China that we get to learn from? What are the things that the government has done to set up an environment where people can actually use these tech platforms in order to achieve instant and low capital businesses? Well, I think the government is a very important driver because the government has been very flexible. They've allowed the Internet giants Baidu, Alibaba, and Tencent called that to actually grow, to develop the e-commerce platform. But along with it has brought in a lot of money. It's one of the largest investment countries right now coming in, venture capital. American venture capital. They've come all over the world. They're investing in China, to these companies. Because they see the possibilities. They see the potential. So no matter what we do, it's a global thing. It's a cross-border, you know, and we've got to think here how, where do we fit in the scheme of things, okay? And I think what we have to do here, a selfish thing locally, although it's a bigger effect on the U.S., is we have to look, how can we capitalize this? What do we need to do? Are we going to sit here and continue the same old economy? Our economy has been a labor-type economy. The way China works these days, you can criticize the whole communist business and all that. You can criticize their aggressiveness in the South China Sea, their ambitions, geopolitical things. But the reality is, in terms of the economy, they're very rational in creating a country where 1.4 or 1.5 billion people have a good life, if not right now, today, then soon. And so, you know, we aren't going the same direction here. We have structures and bureaucracy. We have politics that, you know, is unpredictable. We have all kinds of trouble going on in Washington and around, you know, the government. And the state governments, for that matter. So we're not nearly in a place where we could establish the same kind of rational platform for using this technology to build those businesses. I mean, so that's not so easy. It's not so easy. And my question, as before, is, so, how do we do it? Well, you know, let's take a look back at this. A few years back, when Governor Guihei was in office, my understanding was that Intel was looking at places where they're going to develop their chip manufacturing industry. So they looked at Honolulu. They looked at Austin. And our economy is a different kind of economy. More labor, not knowledge-based. Okay? The Chinese are more of a knowledge-based. You see what I'm getting at? And they're way ahead of us. So when you have a labor-based economy, you don't have the capacity to do things. Also, it's too expensive. So, of course, they went to Austin. And we know the history of Austin after that. They changed their economy as flourished because they have joined the technical age, the digital age. So we have a chance now. Why do we have a chance? Because I'll tell you why. Because the Chinese, up through game, the venture capital has to go out with more outside, more joint ventures. The big America markets are there, number one. Number two, some of the work in China that I've been doing in the past was, you know, the Chinese companies go out now and you do a joint venture research facility. So they learn technology. They learn certain skills. And so they do it with an American company. Three, you need to build a global capacity here. And how do you do that? Well, it's opportunity because the big thing in the U.S. why was it a FBI national priority to find the Chinese student who was missing at the University of Illinois? Because one of the biggest industry things is education. A million Chinese students who have gone on travel majority come to the U.S. college. They pay full fare. For law schools, they've been supporting the law schools. Starting going to them. They're going down. They have the priorities right. And the government has a mandate to increase that so that they will learn more about the West. They learn more about innovation in the Western style. So they do that. And so why not the big, second largest employer in the state as a University of Hawaii? Why aren't we doing that? Why aren't we working as one group, Clearinghouse, to get these Chinese students into STEM courses? Science, technology, engineering, and mathematics. So let me pull out the assumption in my first obstacle, my first challenge, that we have bureaucracy. And maybe the second one is that we don't have political will. We don't see this. And we don't decide to move down the track. Let's assume that we do. Let's assume that we are all of a sudden, we find ourselves capable of reducing the bureaucracy and the cost of the bureaucracy. And we find that we can understand what they're doing in China and we want to do it here. So that's a really wonderful playing field. So my next question is, so given all of that, those two challenges aside, what do we do to incorporate this kind of new technology in Hawaii and in the U.S.? Well, I think especially I'm a selfish man in Hawaii, we are truly a cross-cultural place. I don't think we really capitalize on it. The cultures that we talked about cross-culture are 100 years ago. We have a misconception and we don't understand the issue. And second thing is that we're looking at Asian economies that have passed, Japan has passed already. You've got to follow the money. You're a lawyer, Jay, by training. We follow the money. And the money is the Chinese. Think about this. 40% of all venture capital investment in China was created by these three Chinese internet companies. As compared to only 5% of U.S. venture capital created by Amazon, Facebook, and Google. So there is room to grow. There's going to be money somewhere, okay? So you need big capital to develop this consumer technology. Right. And we don't have big capital here. That's where everybody stops. And they say, we don't have big capital. How do we do it? Well, you know what? Get off your feet. Build the playing field. Kevin Koster and that movie. Build the field and they'll come. What do you mean by build that field? What do you mean? It's easy. Number one, start getting the Chinese students here in the STEM courses because they're going to come here. After that student was abducted and killed in Illinois, they create a huge tech core out of here. There's a lot of smart Chinese kids. Bring them here. They teach their kids how to be global, which is important, very important. Number two, language capability. Instead of focusing on Japanese, let's focus on Mandarin. Look at the schools. Marino is doing an immersion program now in Mandarin. Yolani is going out there to get Chinese students. Again, we need to follow that. Government needs to lead. It's a government-flexibility leadership. You've got to think globally. And you know what? I'll tell you something, Jay. The handwriting isn't a wall. It's the broken ahana, is what I call it. Kids don't come back here. Grandkids don't come back here. In the Chinese circle of life, the grandkids come back to take care of their parents. The parents take care of their parents. And the whole family lives in that harmonious environment. Family is so important for social stability. Family is super. Social, economic stability. So let me go back to the woman who retired and would like to set up a business, or for that matter, the watermelon stand. So I want to open up a watermelon juice stand right here on Bishop Street. And I don't need a lot of space. I can do it in a very small amount of space. So I rent the space. And I make the watermelon juice. And everybody loves my watermelon juice. But I want to make this really easy. I don't want to take credit cards. I don't want to take cash. I want to use the QR code technology. For example, just one example of Chinese facilitating technology, consumer facilitation technology. How do I do that? Well, first, I suppose I have to get the software. I have to have the unit there where I can read the fact that I have just been paid some money for the watermelon juice. And I have to get you, the customer, to download that app on your cell phone so you can pay me. How much trouble would that be? What would that be done overnight? Is that easy or is that hard? Can we take that from the Chinese? Can we use the Chinese software? Do we have to develop our own and who would do it? You raised the trick question, Jay, here. The answer lies in your question. And what it is is, what happens is that let's work with the Chinese to bring them here to do the joint ventures and to do the applied, create a market here. And it's a big thing because this is how you get money in the global economy. This is how you get research. You bring them in here to joint venture. Let's bring in some other major U.S. Internet giant and work with the University of Hawaii. And we create desk markets. And it brings more Chinese tourists. They'll use their WeChat pay. And once you set that up in the system here, I mean, it takes a user about two or three minutes to download it. And once you download it, you put in your information and your bank. And I send a scan picture of my passport. So they have it all there, OK? It doesn't take much. But we need to go actively out there, learn from the Chinese, work with them. Because that platform also means that the Chinese are spending abroad. They're going to come and buy things in the U.S. because consumers. Sure. It's part of the universal system. It's a global system more than anything. And so what I'm saying to you is that this is an opportunity for you to change the economy, from a labor economy to a knowledge economy. Yeah, yeah. And bring the kids back. It sounds like such a simple thing, but the implications are enormous. It means that my lady retired can go and make a business all by herself with no capital investment. It means that I can open up my watermelon juice stand. It means that I and you can participate as customers. It means that there's more commerce, more flow of commerce. It's easier to do business, easier to make revenue. And really, we wouldn't have to do much at all. All we would have to do is have a Chinese partner, I don't think that's really essential, but learn from them, get that software, and then put it into play and sell it to the public so that they're willing to make the download and the businesses are willing to do it, not much, in order to take the money from the people with the download. And if we did this locally here in Hawaii, we would create a community of this kind of QR facilitating software. And all of a sudden, the world would see that it could be exported out of China, used elsewhere, and it is global. And we could prove that here, right here. And I'll give you a very easy way to do it, to test it. There's a Hawaii Retail Merchant Association. They work with the Hawaii Tourism Authority. And so, with all the shops in Waikiki and all the tourist industry, ABC Drugs, they're all of them. They work with Alipay and WeChat Pay. So, the Chinese tourists come here and they send it out back to the banks here. And there's got to be a way to figure that out. And you can test market that. And I'll bet you that sales will triple. Oh, that you're right, because it's so easy. You don't even have to take your wallet out. And it will increase Chinese visitors coming here because they'll say, you have a platform. It's not a Chicago. It's not New York. New York. New York. New York. New York. New York. New York. New York. New York. And again, these are all blessings. And it puts Hawaii on the global map. Brilliant. Brilliant, Russell. So, let's do it. Right after this show, let's make a deal. Let's make a deal. Let's get that watermelon juice outside. Yeah. Think Tech Asia. Make a watermelon juice with QR codes. Thank you so much, Russell. Thank you, Jay. Russell Moon. Think Tech Asia.