 Okay, think tech Asia the one o'clock block on a given Tuesday. I'm here with Roger Epstein Who is a lawyer who a tax lawyer, but who has done a lot of work in China? And that's why we're talking about belt and road the belt and road initiative Probably known as one belt one and one road. Yes, that's changed though Because you could not argue this is one belt and one road. This is many belts and many roads Mm-hmm. It's it it dirts the earth. Yeah, just about dirts the earth at least the earth as far as Asia and I think even some parts of Africa and Europe We are not part of that earth Yeah, so let's talk first in the first part of our show About what what it's doing who's involved how it works the second part of our show Let's talk about the American participation or not and if not what effect on the US, you know Because this is a global initiative. Yeah, so I guess it was 2013 Xi Jinping decided going to do this and actually in my view would follow him what he did with CCTV CCTV was a China news network in China and he decided or they decided back in the early the ought years To make it global and they did they made the China news network or something and there are 44 stations now all over the world And they are pumping out to pro China news all over the world. Yeah, so they became global in terms of the information and propaganda And that would that worked so then this follows. This is economic development all over the world, right? right, oh, yes, and and The the the overall picture is Here's places where there isn't adequate infrastructure either by land autos rail trucking Or by sea which is the road so maritime so the the grand scheme of the Chinese is to lend money and Build out the infrastructure in all these different countries so that you recapture the Silk Road the old Silk Road from China to across Europe and Very very incredibly big Undertaking and in my mind very thoughtful as I think the Chinese are and in economic matters It's visionary vision a hundred years. Yeah, you know We'll talk about this Before or later on when we talk about the United States, but I taught in University in Beijing last last year for four months and What I found was what I've seen since I've been going there at least this last iteration from 2007 on Tremendous optimism tremendous looking forward to the future. You know China had Literally no written laws until 1983. You couldn't own personal property or real estate. You couldn't own anything from 1949 To 1978 going on 80 maybe so the change from Mao died in 76 77 78 they had the gang of four fighting for power Deng Jiao Ping who was a Joe Enlai protege took over and he began to open up the China to capitalism essentially and so That was now that was a pivot of major magazine for the whole world It was huge and they brought 700 million people out of poverty with this. Yeah, so they started with Letting you buy real estate imagine if in 1980 you were able to buy real estate in Shanghai and build a shopping center And now you've rolled that over seven times That's why China has more billionaires than anybody else in the world now then they got into manufacturing as you know That was the low-cost manufacturing And now they're too expensive So the low cost has gone other places and the factories are stepping up to a little higher quality a little higher a type of product And what you also have in China is And somebody told me this some years once you have $3,000 of income a year you can begin to be a consumer So the third rung of the Chinese Economic growth is consumerism which we have been on forever We know how to do that. I had to do that and it looks like we're kind of tapped out if last Christmas was You know, we're a matured environment Well, this sounds like the fourth run You know the Xi Jinping initiative Belt and Road is is beyond anything that's happened so far That's true. It's an expansion of China's economic success Everywhere. Yeah, and and it's opening the way To Chinese goods being sold along the Belt and Road Sure. Yeah, so you can make a pretty good argument that you know This vision works for every place it touches and theoretically, you know, we're talking about health care We're talking about energy. We're talking about transportation. We're talking about gee everything Yeah, I could go on and and the result is that a country which was a Undeveloped country, you know, you know the bottom of the ladder. Yeah all of a sudden 35 years ago I'm with less than 40 years ago. I mean, I'm talking now Yeah at the bottom of the ladder like an African country, right with Belt Road all of a sudden You know, it's it's a modern first world country. It has the technology. It has the communications It has everything you need to step right up and this can happen right away through Chinese investment Yes, so I mean it's it's a huge plan and couldn't it couldn't it also Bring many African countries out of poverty and their citizens How many hundreds of millions of people are we talking about with that possibility all of whom will like China? All of whom will have positive You know foreign foreign connection You know diplomatic connections with China and I think this is a kind of a new imperialism It's a soft very soft power Soft imperialism, but it it cements China's position on a geopolitical basis Everywhere it touches everywhere it raises people up and all boats are being raised. They're all being raised in favor of China Yeah, absolutely. There's no question about it. China is becoming the economic power in the world they're number two to the United States and We've decided to go insular and they've decided to go outwards and now keep in mind that one of the things that's also happening a big complaint about this is that China's kind of forcing this not so much forcing But it's almost what the World Bank has been accused of many time giving people infrastructure. They can't really pay for it Then they become big debtors of China and also many of the projects Once they start they bring a ton of Chinese Employees and workers down there and so there's a lot of discussion and a lot of negativity about maybe China's really in it for China and are The other countries getting out of it What they should be and and are they paying attention? Yeah, to the local people. Yeah, they should yeah Well, maybe maybe it's dynamic, you know, hopefully Xi Jinping learns by his errors There's Sri Lanka case is a good example of an era. Yeah in my view in my view He built a harbor for them They couldn't afford the harbor and it's huge billions of dollars. There's no money in Sri Lanka So they defaulted and then he wound up owning the harbor, right, which is not very good. So it's uh, it's You know the debt trap they call it the debt trap, you know, you know Jay, uh, I First went to China in 1982 I've been going to Hong Kong for you for years before that started in 74 in 1982 China was clearly a third-world country everybody riding around bicycles the cars were honking and and Nobody was making any money China had literally opened up in 76 when when the Queen said they're going to give Hong Kong back and then a lot of Manufacturing move there. So we're still in a pretty low state of Development then I went back in 94 and spent some time with in some economic conferences and the level of sophistication was much higher and The Chinese were learning okay, and then The it was still kind of basic somebody came back after that meeting and wanted to get money from Hawaii to build An electric power plant and they gave me a four-page paper You know as a prospectus and basically what it said is we got a lot of people We don't have electric power. Would you please give us three million dollars so we can build a plant And I know it's a cheap plan cheap plan Well, it was in China and it was cheap Then 2007 I started going there on a very regular basis and taking lawyers to come back and stay at my law firm's office And and I began to see a much much higher level of sophistication and I would say today The Chinese lawyers and businessmen are 90% of what we would want here. Maybe 85 90% So China learns they learn they grow they have more students Educated in the United States than it far and away in it. I was up at Columbia University earlier this year or last year and You walk around not only you see a lot of Chinese you hear Chinese spoken everywhere. So The Chinese are optimistic. They're enthusiastic They see a huge bright future. They're on this this streak up and we talk about oh, you know the economy's suffering Well, it went from 10% to 8 to 6 to 4 still a pretty good growth. Yeah, and And unrestrained growth is is unworkable anyway So I see the Belt and Road as a huge opportunity for China to see yes Geopolitically as well as economically. I mean think about it. This road starts in China goes all the way across parts of Africa into Europe South America don't forget South America. Yes. Yes, and so They're really saying let's work together then you're gonna have treaties you're gonna have economic treaties You're gonna have all kinds of Relationships that kind of cut the United States out to a great extent So what you know what's interesting is that they're trying to be as you say They're trying to learn every step of the way because they're building something that has never been built before Yes, this is bigger better more visionary than any project anywhere by any country ever in the world And they're trying to build it in my view Systematically and smart one thing that really caught my eye Roger is is that in Wuhan they have established a law school? That is dedicated to one Belt one Road really it's a law school that teaches the law in every place they want to go So you got to do that right if you're going to make investments that you're gonna make partnerships Yeah, if you're gonna do loans and you can do management You have to know what the law is in that place So you you teach the students in this special law school what it's like all over the world. That's amazing. Well Yes, they're they really see the future they're working at it in an intelligent way they have a long-range view I think you know, we're still 10 15 years away from this being in a you know, a really significant path for commerce, but I just went to a lecture the other day where a lawyer In China and Hawaii connected with Hawaii said They're there their economy is going to be bigger than ours in the next five years Well, I think you have to fold in the Belt Road into their economy Right now or at least up till recently their economy has been within the boundaries of China. I think mostly But with belt one belt one road, it'll be global and it'll every single Every single project, you know that they do or manage in other countries You have to consider part of their economy, right? Yeah So one of the interesting points about this is that you mentioned a minute ago is that it's it's it's loans Yes, yes, it's not necessarily investments I think if Xi Jinping is learning he's gonna figure out that he has to do both and the question Oh and and you mentioned also that the money comes from China, but I think he's gonna learn he is learning It's happening already that the money isn't limited to money that comes from China He's gonna he is setting it up. So the investors come from everywhere. Yes, and Hong Kong is a big part of that That's why this program yesterday the Hong Kong business association Which is actually all across the world And they take the view that Hong Kong is and will continue to be a funnel for money for investment money into China Yeah, so that money comes from everywhere. It has come for the past 20 years. Oh long before that, you know 20 years since the turnover It has come from everywhere and it will continue to come from everywhere And they would like it to continue to come from everywhere But that money is is global money and he gets to manage China gets to manage how that money is is is either loaned out or invested This is tremendous power not only over his capital, but capital from everywhere And can you imagine the deals? He's gonna try to work with other places to make sure that they do put the money in what about The countries that are doing well now in Asia Japan Korea Taiwan He'll have a tremendous amount of leverage to say I want you to invest here I want you to do this and of course in China the government controls everything The government controls the business they even have some companies some government officers have their own companies to do entrepreneurial kind of relationships with the private sector so It is geopolitical no question about that and it's going to be very Powerful and we're going to have to see how China opens up remember you couldn't own property there until 1980 or around that period 79 80 and Now it's loosened up. So All kinds of things are happening everywhere including this Belt and Road How are you going to do the Belt and Road if you keep the Renmin be? From from leaving the country So how are you going to do the Belt and Road in a in a way that foreign countries? You know third-world countries will accept your advice and your your help When you have repression going on at home Yeah, when you have Chinese people leaving China because they don't like the repression right when you have the social What is called the social score? Based on everything you do an invasion of your privacy as no other country on earth has right those things are there Contradictory not to mention the pollution not to mention that's going to be spring you know in Laos there's a big several big dams built so that China can have more water and They built those dams, but it flooded a lot of farmlands and so there's gonna China is going to get all this backlash. They're gonna have to be very respectful of the environment and human rights and employee rights human resources human, you know Well all the rights that go in a first-world country these days and so you know what what's gonna happen is I think I think and I'm being Optimistic here that China has a fabulous program. It is going to learn it is going to morph It is going to see change that program into an even more fabulous program for itself It's going to change in the process. How do you like that for an optimistic? I agree with you I think they have to change to to be more open and more China doesn't even call themselves communists anymore. They say we're socialists with Chinese characteristics That's the term that they call themselves right although they did Build a statue in Germany for Karl Marx on his 200th anniversary of death But you know things are going to change and and if you in my my mind They're so effective. It's it's like a more than a benevolent dictatorship. It's more than that It's a thoughtful one-dimensional government That has its has its big fear that they're going to lose their control, right? Maybe that makes them more thoughtful to worry about yeah, at least they're thoughtful about it because people there's There's a lot of people in China, and it's hard to control 1.3 billion have to keep them happy at some level You have to keep them happy So let's take a one minute and be happy. Okay for a little break So when we come back I'm going to talk about the US and how all of this affects or is affected by yeah The United States in its present form and how it might change. Yes, we're very good. That sounds fascinating. I'll be back Hi, I'm Rusty Komori host of Beyond the Lines on Think Tech, Hawaii My show is based on my book also titled Beyond the Lines and it's about creating a superior culture of excellence Leadership and finding greatness. I interview guests who are successful in business sports and life Which is sure to inspire you in finding your greatness Join me every Monday as we go Beyond the Lines at 11 a.m. Aloha Aloha, I'm Yukari Kunisue the host of Konnichiwa, Hawaii Japanese talk show on Think Tech, Hawaii Konnichiwa, Hawaii is all Japanese broadcast show and it's streamed live on Think Tech at 2 p.m. Every other Monday. Thank you so much for watching our show. We look forward to seeing you then. I'm Yukari Kunisue. Mahalo I'm so happy to be happy. I'm so happy to be here with Roger Epstein And we're talking about China. We're talking about One Belt One Road And this is the part of the show where we compare what happens there with what happens here Because here, you know, the world order is changing. China is a bigger part of it every day And the us seems to be a smaller part So, um, what what how do you see the status of the united states here in the global order these days? Well, I think the United States is still despite shooting ourselves in the foot over and over again The dominant player in the world the the place where people want to be the the the goal when I taught in China Last just last year The students, you know, they're all wearing the statements and I was teaching at a law school a Chinese law school English Legal writing in English using American case law And and so to me China sees the united states is where they want to be now Things are definitely changing and the trump administration has decided What's in it for us? We need to protect ourselves. I think that's exactly where you don't want to be as the world changes You want to be part of the change Uh talking about the belt and road. We had a competing kind of project With many of the leading the the the larger more established Capitalist countries over there called the trans-pacific partnership uncle. Donald got us out of that Uh, so now we don't even have we don't have anything And some of those players are trying to reform the the trans-pacific partnership. Some of them are talking to China certainly We're out of it. So it leaves All those countries to work together if China's successful In building the belt and road and as it as as it gains more credibility if it is successful In its movements at down different belts and roads, as you say Then that's going to encourage other people to work with them and uh And trans-pacific partnership is already way smaller Than right right. They've got hundreds of billions involved. We've got hundreds of millions Oh, they trans-pacific partnership has hundreds of millions. There's really no comparison as to the size and leverage It's kind of billions, but but we're talking trillions with the belt and road. Yes, we are so Uh, so where are we and what are we doing? You know, uh We're trying to At a national level we're trying to recreate what we had before manufacturing and and uh Lower level pay, but really what I see when I go into to China What they want from us is our technology now people say, oh, they're stealing our technology. Well They they have they have been But they're getting better the legal system is getting better there and and my thinking and what I've been trying to work with Is you enter into a partnership with somebody if this guy's got these capacities and what you have is technology You ought to be working with the people who can build the new products who can Collaborate with you instead of saying we're going to have a trade war with you The trade war I think is so damaging to the united states not only in china, but europe We were talking. I don't know if they actually did it. They were going to give soybean farmers 60 billion dollars in in free money because they lost all their business in in uh, china And who's going to take that over? That's not just the they've got to find other sources of suppliers Are those suppliers going to go away when when we end the trade war? I don't know all i'm saying if it I don't see that the way to go now Donald trump's uh mo for everything is Before he negotiates with these smacks interface Sometimes that works Uh, I think new york real estate. It works in new york real estate where maybe it works with kim jong-un Uh, maybe it works with jijin ping at first But you can only get away with it so much and then you got to start being reasonable And as a lawyer, I know you can protect this technology So what i'm saying is if what we have are the brightest people in the world working on so many things And that may be an overstatement, but we've got a huge supply of those people. What are they going to do? They can't manufacture in the united states too expensive. So they got to look for other places It's almost like this area is growing and this area is declining But we still have huge amounts of valuable assets If we collaborate, we're all going to be successful if we don't we're going to fight about it and I can't see us winning. I just don't see how we can go back to being First of all We have one fourth of the population in china. So it's not really a fair comparison to say their Economy is bigger than ours If we had four times as many people our economy four times as big as theirs so And also, I don't think does it really matter j. What is the geopolitical? What are we fighting about china's not trying to take over the united states the way khrushchev was and No, it's pretty much trying to take over the world order And and and that's a good thing. I mean, it's it's aspirational But it's visionary and if they realize their dreams on this belt road thing The the world order would be changed in their favor and and that's um, I hate to say it's uh, that's that's not a win-win necessarily I mean, it's a win-lose you think you lose something if they take over the world order. We lose why Because what do we lose? We are going to be marginalized. We are not going to have the same markets We are not going to have the same welcome welcome matt in so many places And this is because we shut ourselves on the foot. It isn't necessarily because of anything they did They're just steaming down the track and we're standing still one of the big things that's going to happen Is they're going to stop using us currency as the only Measure for completing transactions. It's going to start with a basket and then who knows where it's going to go And and and that's been propping up the us dollar for forever. So when the us dollar gets cheap In some ways it helps you now you can make more goods But on the other hand for consumers, you can't buy things anymore You can't travel you can't buy the same kind of foreign goods So one of one of trump's negotiating points where he's going to meet in florida with shijin pings Yeah, uh, he wants them to increase the value of the relative value of the rmb Yeah, because he thinks it's too cheap and it hurts us, you know on a Um, you know a trade basis But in fact, you know, that's not really the problem at all That's a make-leave problem Well, if it hurts us on a trade basis, it helps us on a consumer base. Exactly And so who are we who are our warriors in this battle? Are these multinational companies like Walmart and and our car manufacturers are they even american companies? and and uh And where are they going to be in 15 or 20 years? Well, that's a big question and china, you know things ahead a hundred years And there are this whole project is with that in mind Celebrating for example the 100th anniversary of the creation of the the prc 59 right in Sorry 49 and so 100 years after that There'll be a big celebration and there'll be metrics and achievements to to match the 100 year birthday So the other thing I wanted to go to just before we we break here Is this uh, you know You describe a picture we have described the picture together here That sounds like the u.s Is not only on a track to the wrong place, but it has been on a bad track for a while China, you know with all its issues and the what I call the potholes in the road Is still moving down the road and they're doing pretty well at it could it be That We've we've already lost this Could it be that it's too late for us to regain the primacy we had all these years since the second world war Could it be that there's really nothing much we can do about it? We might as well enjoy the loss of our leadership. Could it be yes Yes, and is that a bad thing wouldn't it be better if if the leadership around the world was balanced We're not going to we're not going to go out of business. We've got so much going on here and we're still powerful Insta Effective around the world so if we share it I think that's a lot better than us dominating and and if we're going to fight with china and let everybody else go to them Now all of a sudden we're we're standing alone But if we collaborate with china we collaborate with europe now all of a sudden as the world order economically changes We become an important player in it. Maybe not the dominant player But maybe our dominance is not so great anyway. It's way. That's the way things go Yeah, it's the way things go you can't keep I mean every empire the every the american empire is At a completion in the next 10 20 30 40 years So what it's time for now under trump But probably not going to happen under trump or under his successor Is a new foreign policy that recognizes what we've been talking about and that tries to create a denouement A harmony Yeah between what they're doing what we're doing and try to avoid the hostility the contention the trade wars and All those things that lead in the wrong direction We need a new a new and comprehensive farm policy that is realistic And that and that covers all these points we've been talking about that is exactly right jay And if we could do that Then I think we're better off and the world is is better off And we got to stop thinking in terms of enemies and allies You know, we're all in this together even russia, which you know has its real serious problems, but There's no chance we're going to war with china unless Unless we do something insane. I mean they have everything to lose We have everything to lose and nobody has anything to gain right and climate change will claim us all So why are we so why are we spending empty? Hundreds and hundreds of millions why is half of our budget on military that isn't even going to Be worthwhile. I mean the the real military problems have to do with isis So I think we need a complete refocus and we need to stop saying and and and there's been this huge backlash against the way Trump's administration is doing it. So maybe the backlash will produce just what you're talking about We need to look at things realistically and honestly and we need to go to get off this mindset of what's in it for us We're number one, you know one more. I like to say this We're out of time so I can say anything I want green bay packers Vince Lombardi He changed the motto of the country From to winning is in everything. It's the only thing or what backwards it used to be Doesn't matter whether you win or lose. It's how you play the game. Yeah, that's where we need to be Yeah, we need to be playing the game Instead of trying to dominate everybody else From your lips to god's ears, roger. God's right in the room with us. Yes, roger Attorney traveler and global economist. Thank you so much and good friend of jay fidel. Thank you. Thanks