 This is Stink Tech Hawaii, Community Matters here. Okay, Stink Tech, it's Monday, it's 4 p.m. That means Stink Tech Asia with Russell Liu. Welcome to the show Russell, you've been down here plenty and we'd love to see you. Welcome Ni Hao, welcome. Ni Hao Ma. One Hao. Yeah, okay, all that, yeah, and happy New Year too. Yes, happy New Year. And the American sense. Yes, but we're coming close to the Chinese New Year, February 16th. Yeah, she didn't get in quite a little bit, I'll save that. That's right, yeah. So anyway, Russell is an American lawyer, a Hawaii lawyer practicing in Beijing and teaching in Beijing, and he comes back and forth and we have these great moments where we discuss, you know, the sort of the cultural arbitrage between the two countries. And let me add that, you know, I think in modern time we don't fully appreciate China, we get fear about China and we get China bashing about China and we don't want to trade with China. We want to push China around. We are afraid China is pushing us around. It's tense and this administration is not doing a very good job at mediating that. And so it's important we understand where China is, where it is economically and politically, you know, in terms of diplomacy and in terms of its global, what don't you call it Russell, its position on the global grid, very important. That's a good term. Okay, so Russell and I are going to discuss that today. We're going to figure out where China is, regardless of what Donald Trump has to say about it and where the U.S. is. And guess what? Also, we're going to talk about where Hawaii is, how Hawaii is affected by the sea change around the relationship between China and the U.S. and China. Before we start, maybe I should look at one thought for everyone out there in the audience. Regardless of where you are, whether you like China, you don't like China, you don't understand it, or you do understand it. There's a saying that I always have to somebody is that when 1.34 billion people in a herd move in one direction, you feel the wind. You feel the wind. And you're going to have to deal with that. So it's important that we understand more about China. And especially this community, you know, Jay, I grew up here, lived full-time in China for 15 years, so I have a little different view. I'm not an expert because it changes every day so quickly, so rapidly with so many people. Well, I think it's clear that China in many ways, even on our own terms, is ahead of us. We had an interview with a young fellow who came from China a couple of years ago, went to Maryknoll School. His name is M.J. Mao from Shanghai. And he finished Maryknoll School. He went to the University of Wisconsin. He's Olympic swimming material. He's also into science and diplomacy and design. A very interesting interview, I thought. But here's a kid who's completely, I shouldn't say kid, he's in college, but here's a kid who's completely successful and whatever he touches. And we have to regard that. You know, it's like, when I first visited China, I was blown away by the energy of the place. Everybody's working at 10 times the speed that you see in Hawaii or for that matter on the mainland. And you say to yourself, if this energy could be harnessed into an economy, which is being harnessed into an economy, it would be the most incredible economy on the face of the earth. And that is being played out right now. So I guess the question I put to you, Russell, is, you know, China is recognizing its power, its economic power, and the power to deal diplomatically and on the global grid. What can, what has the U.S. done to deal with that, to recognize it, to collaborate with it, to catch up with it, you know, to compete with it, and what has it not done? Well, you know, I think we take a step back, Jay, and just remember, you're dealing with a culture that's thousands of years old, a culture that has learned through many mistakes, developed itself, survived many things, survived wars, survived being colonized at one point, and yet being able to recognize through these lessons of how it's going to implement itself through its form of government, its form of culture, and form of society. And strategy. And strategy. What comes up to strategy, incorporating all these elements, and that's what makes it very fascinating and unique. But I think as Americans, we can learn, you know, as you know, Jay, I've been there 15 years full-time. I see things differently. I see what can work, I think would work here, although it's a different culture. But I think you're right. I think, you know, everything, it has to be, there has to be a direction. And my concern is we're 2018, and as we go over some of what we're talking about today, you know, we're going to be overtaken by China in 2028. That's the date. It will become the number one economy in the world. And for many Americans, that might be frightening, but I think we shouldn't be frightened, but I think we should learn how that we need to maneuver because of the changes that will happen. They will happen with or without China, because of technology, because of different things. But we're going to have to understand what's happening, not only nationally, but I think for us locally here in Honolulu. Well, I was going to say, it's the whole analysis of this. It's complex. The whole analysis has to be nuanced. You can't be either afraid or bullied. And unfortunately, our president, who doesn't read and in many ways doesn't think, and it was people around him who just do, yes, man, the problem is he doesn't understand. So he gets in there, the first thing he does, you know, after inauguration a year ago, is he's bullying them or trying. The second thing he does, he puts his arm around Xi Jinping's shoulder and makes like their best buddies. Neither of these is a nuanced approach. Fact is that Xi Jinping could, you know, think him, outthink him any day of the week and is outthinking him. And it isn't only Xi Jinping, it's all the people who, you know, run diplomacy and international business in China are outthinking Trump, and therefore outthinking American policy and therefore this country. So, you know, the problem is that they are inextricably moving ahead of us with that economy of theirs and that energy I saw on my first trip. And we do not fully understand, recognize, and have a way of dealing with it. We should be much more nuanced in our evaluation of that in the way, as you said, developing some way to address it. Unfortunately, we're way behind. And we're actually, in a funny way, we're more behind now than we were before Trump. Yes, Shane, I think you've raised a good point that we are behind, definitely behind. I think we're way behind the cue ball, but that doesn't mean that we can be in a direction, that we can start moving in the right direction. You know, I think the first thing that hits me, Jay, is that we are a culture in the U.S. We seem to be a governance culture that's short-term. The Chinese are long-term. Now, they have every five years, they have a five-year plan that they come up with, and they chart out their goals, sort of like managed by objectives. We had that in the 70s and 80s. Well, the funny thing is that all that five-year planning came out of Russia. It came out of the communist era. It came out of the notion that you can make a plan and execute the plan, and you force people in that container and so forth. And when it first started, it was really hard on people, and it couldn't possibly work if you force them into the plan. But more recently, the planning has been much better, more sophisticated, and more effective. And furthermore, we have all found out, watching government, not only in Hawaii but in the nation, is you need a plan. You can't just swagger from one side to the other. You need a plan, and China understands that. That's right, and it's interesting. I was googling today just out of curiosity. Do we have a strategic plan for the United States? Is there something we're in? Not a chance, Russell. Not a chance. I couldn't find anything. And then I read some legislative reports, and we're talking about really partisan politics. We're talking politics that's killing everything where we should be going. We're not talking about economy, building economy. We're talking about investigation of Russia. We're talking about protecting the president. We're talking about going after the Clinton Foundation. It's all politics. So we are not getting what we should be having, a governance where we're having people know that the government is doing something. We're addressing it. And it's frightening because I read a report that was a legislative report, the three years ago, that one of the things the Republican Party was doing was cutting down these education spending. And again, China has been in the opposite mode. They've understood where they need to get to and how to do it. They understand that education is important. They understand building infrastructure is important. Building capability. We're doing it while we watch. As we watch, it's amazing. Despite all Trump's campaign promises to rebuild the infrastructure of this country, not a nothing. In fact, the tax break is going to make it much harder to do that. So anyway, I want to cover three things that we have time. I hope we have time. Number one is how are they doing right now? What is their plan right now? And how will it affect the United States? And what should the United States do to engage with them? And let's give all those guys some advice today, Russell. Sure. Well, you know, it's interesting because their plan for the last 20, 30 years was to bring manufacturing to China, which they did. And that created jobs. That created an engine. And that brought a foreign direct investment where American companies were coming to China, German companies, French. The world was coming to China. To build capability, the manufacturing. And China realized that somewhere along the road that low-end manufacturing is not going to cut it. You're going to have to move up the curve, the value curve. So they came out with a policy a few years ago where they said, we're going to switch, we're changing tracks. From low-end manufacturing, we now move into added value technology. We want innovation. So their plan is by 2020 to be a master of innovation technology. And their plan is in 2050 to be number one in technology in the world. 2050? 2050, long-term. So they're taking steps. But along the way, along, you know, with their GDP that grows at 6.5% a year, the U.S. is 2.2. Where we're at now and where they're being 10 years in 2020, China, based on that annual GDP, a conservative figure, they will be ahead of the U.S. period. Their GDP. And it's very interesting where they are now. They're the population centers. They're about where the U.S. was in the 1940s. So think about the 1940s to 1970s, 70s, 80s, 2000s. It's a long way and a short time. It's a long way and a short time. But remember how that gap when the U.S. was urbanized, then people had purchasing power. So as that gap shrinks down, more people are moving the cities, which means that the purchasing power of the citizens will be truly greater. And so we're seeing that wealth is being spread in the country. And then we're also seeing a one-road, one-belt, one-belt, one-road, one-road. Yes. You know, that's going to have a sort of, almost unpredictably good effect on China because it's going to connect it up. It's going to make it a global power economically. And that's part, I mean, the one-road, one-belt, one-belt, one-road. One-belt, one-road. One-belt, one-road initiative is part of a much larger EDI-E-L-M-T. Thought package. It's a thought package of being global, of being a leader in the global economy. That's what we're talking about. But, you know, Jay, I got out to that. That's reminiscent of their blueprint for domestic China, how they've created the supply network, the chain, and China through their rail systems, their high-speed. They've got the largest high-speed rail in the world. It's all about connecting. It's connecting. So the next step is connecting the world. And taking the history lessons that Silk Road has been the key to Lake China and the maritime route that goes through Southeast Asia and around the Indian Ocean. That's why I have the noise in the South China Sea. They want to control transportation and connection. I mean, even if they're being bullied about it, which they are. But, you know, the problem is the possibility of overheating, you know? Because when you have a planned economy this way, you know, a five-year plan and all this, you know, we will do this. And I mean, although they're a little more flexible than they used to be, they're still operating on the same, we will do this notion. So the risk there, which I think existed 10 years ago and still exists, is the risk of overheating, right? People talk about that risk even now. So the question I put to you is, what are the challenges that China has in reaching those goals? I mean, could it be that somewhere along the line, they're going to overstep it? They're going to be overheating and their economy will suffer? Well, I think the unique aspect about the way the Chinese economy works is really run by the government. But, you know, we think in America, that's bad. But go to Singapore. Singapore was basically a benevolent dictatorship, Lee Kuan Keeu, and he ran the country. But he's all fit. You look at the book Tiger Mom, how the Chinese mother-parents will kind of control, not control, but manage the trial to make sure that they're on this right road. Now, that's how the government is. It's the same culture. It's a cultural thing. It's a nuance. So people will follow that. You're not worried about overheating? I don't worry about overheating because the adjustments are there because they have a different governing system. For example, China was very worried last year because the capital outflows, the investments remained outside the China that were not good, that were draining money out of the economy. So what they did is they clamped down. And a lot of the leading private companies are under scrutiny. And they have made adjustments so that the regulations have been changed so the outflow of capital is really scrutinized now. So the outbound investments that are being made, they have to make sense with the Chinese national priority. Yeah, more and more the conversation among the people I know is to question whether democracy still works the way we thought that it worked. Back when we went to school, and certainly when you and I went to law school, democracy was the cat's meow. Democracy in the American form. But now you begin to wonder, and you hear thinking from really many quarters about how a benevolent dictatorship, dictatorship is too hard a word. But in that way, a strong central government with a strong group that has a lot of discretion and then as well motivated for the benefit of the country, maybe that's really the model that will prevail in the 21st century. Because democracy right now doesn't look like it's doing all that well. I think that's a really good point, Jay. That really gets a crux of economics. It's the governance. It's the corporate governance, like a company. And I look at it this way. We have a country where we value our freedom and liberty, which is wonderful. In China, maybe it's a little bit different because it's a Confucian society and people will follow the leader what's best for a group of people, not individuals. Because 1.34 billion people, it has to move. The herd has to move. So as long as the government's moving the herd in the right direction, kids nowadays can afford to have an iPhone. Living conditions is tremendously improved. All of these things add up to something that people think I can live with this. And I always give this example. Everybody asks me, what's the difference between China with the government, so forth, and the US? Well, look at this way. It's like this. Imagine a 25-lane highway. That's China. Huge highway. Many lanes. As long as you don't get to the edges with sensitive things, you can cut in and out. You can do many things. And the US is more like a 10-lane highway. We come in a rural law, a box. And you don't work out practical solutions. You're worrying about the law and the restrictions. And again, those restrictions create the rural law, democracy. But you may not get the real very pragmatic approach. So when people in China talk about pragmatic approach, I think that makes people in America scared because it's a different approach. There's a lot to move around. Yeah, you want a pragmatic approach? I'll give you a pragmatic approach. We're going to take a break. That's a pragmatic approach. We take a one-minute break, Russell Liu, and then we'll come back and we'll talk some more about the same subject. And we'll also find out what's going to happen here and what the US can do about it, if anything. I'll be right back. Thank you. Nothing has changed. Russell Liu is still here. He's an American lawyer practicing in Beijing and teaching in Beijing for 15 years now. He is exquisitely familiar with the comings and goings between Honolulu and the US and China. As it has evolved in that period, it's really remarkable. I hope you write a book on this, one of these days. Anyway, so where is it going? They've got a plan. The probability is that they will not meet a showstop kind of challenge, like an overheat challenge. Short of some global disaster, they'll keep on going down that track. They'll reach Europe. They'll connect on a global economic grid. They'll have all kinds of... It was an interesting distinction between hard power and soft power and the idea is that the US has been engaged in software, soft power policy, where China's power is usually harder. And so they're dealing with other countries. It's a little harder than ours is, call it hard power. But they will prevail, I think, in many cases. Short of any kind of war, just a little bullying here and there, a little pushing here and there, and economic pushing included. And they will achieve global economic supremacy. That's what is likely to happen. So, I mean, you agree with that, and when do you think it'll happen, and what will be the fallout? What will be the implications of it for them and for us? Well, you asked me, when will it happen? That's going to happen in 2028, based on the annual GDP of the US and China. What, January 1st? Somewhere along in 2020. My brain works. Probably at the end of 2027. Okay. And it might be soon. July 31st. But do you raise some interesting points, Jay? We're just talking about the two systems. You know, I view it as a lawyer, and I see how things are done. I think the problem is that we have this rule of law society. Not a problem, but we have everybody fits in this box. We do things a certain way. And people along the way that know how to milk the process, as I would say it, make it more inefficient here, and ends up the project being dead because the money's run out. Things get in courts, litigation, and you run things over. And in the end of the day... I was involved in a program three weeks ago, December 7th, it's a month ago, I guess, at the university called group participation in a polarized era. And it's all about the laws that were adopted after 1970, how they encouraged and permit public participation. And they do not limit public participation. And people who want to participate, like activists or self-interested groups, have found ways to use those laws to stop progress. And how do we... What's the countervailing? What's the swing back? How do we fix that? And it's not an easy answer, and there may be no easy answer in terms of creating a society which is efficient in getting things done. Well, one of the things that's important to getting efficient done, yes, we have a rule of sight, recognize that. But I think what I would be very concerned about is that we come to this crossroad where, yes, individual rights, I believe, are important, they're sacred. I teach a U.S. constitutional law class there, and people understand and they agree. In the U.S., we have the best system, democracy for individual rights. But along the way that we've got to recognize that with these rights also comes a responsibility. Responsibility of leaders to understand. You need to put aside partisan things. You need to think about what is good for the community and the people. And I believe that China understands that. Do you believe the leaders in China have, in their mind, the wish to help all the people? I mean, a sincere, genuine, non-political, elemosinary, you know, common good kind of wish, or is it less pure than that? Well, I can't really say, because I'm not in political structure in China, but my observation, I can point out that, from what I see, is that because of the Internet, there's much more open transparency, social media in China, that I believe that it keeps everybody in track because they have a one-party system. And I think the government does realize that it can be in jeopardy because of its past history in China. Things can happen very quickly overnight. That being said, I think that people are more or less in a one-page, they're on the same page that they realize they have to make a better economy. But you know, it's like this, when you're winning by a couple touchdowns, you have an attitude. You have a winning attitude today. And you want to further that, you know? So I think that's where they're at. They're winning the game. They're winning the touchdowns. What do they think of the U.S.? What do they think of the troubles we're having with our president? Well, I think they're amazed at what's going on in the U.S., where everything is too open, maybe too transparent, and people aren't looking into the wisdom of being long-term and everybody's fighting for this power thing. And you know what it reminds them of? One Chinese expert reminds them, this looks like when China had a cultural revolution. You know, I was just going to say that. It's internal. You know, I heard there was a Chinese visitor to Hawaii and he was speaking about the comparison that you and I are making. And he's talking about the history of China in recent years. He said, you know, we had our cultural revolution 1979. It was very hard on people. Now you are having yours. That's right. What an interesting thought that is. And as an American in China, when I'm thinking about the U.S., I'm thinking the big question is, who are we as Americans? You know, the demographic changes, the ethnicity change, is it all happening in the U.S.? There's more Spanish-speaking culture and we've had that event in Charlottesville and we're having people giving the white power sign and President Trump's one of his aides. And it's shocking to the Chinese that this goes on. So they don't think it should go on. They think the government should step in and stop it. The government should stop it. Because, you know, this leads to so much disunity that the model, the platform, the government, business, it comes to an halt. So paint me a picture of China, you know, in five years. What are we going to see here? How is the economic success going to play out? To the men on the street, to the country, and to the way the country relates to other places? Well, I think there's two ways to look at it. One is domestic. What's going to happen domestically? And the other is what are they doing so globally? Are they making impact? Where are they? And I think domestically, you know, that was part of the mission for the last 10 years. They've got the technology. They've built up their logistics. They've built up their transportation system. So they're the largest network of rail in anywhere in the globe. Things are accessible. So there's less of an issue of geographic where you are. You can't get things. Now you can get things wherever you're in China. Number two, they've moved into innovation. So they're coming up with their own leaders, you know, in technology. Phones, look at Lenovo. I just bought a recent Lenovo computer and you couldn't tell that this was a Chinese company. You know, fantastic. Well, they're certainly competitive and I think they learn from us. But then they're past the point of having to learn from us because they can learn intrinsically. Right. But let me ask you the last question, Russell. So, you know, this is hard for us. And right now we're in a low point of our national development. I think it's clear. What do we do? I mean, if you were president or secretary of state or a combination, what do we do to address this? Because they're competing with us. They're not going to stop competing with us. They're going to get on top. You know, I remember there was a chapter on this issue in Simon Winchester's book, Pacific, where he explained that the power had changed in the Pacific. But China was the power. And the message essentially was, get used to it. It's changed. So even assuming that's correct, what do we do to accept it, to deal with it, to do better competition with it? What do we do? Well, I think, first of all, I think this is a good soul searching for the country. And again, and I'm going to talk to the local community here, I think, yes, we have to accept it. But I have a saying that the Marines will say, adapt, improvise, and overcome. And we need to adapt. We need to adapt to that there are changes. We need to adapt it. And I believe being in China 15 years, my personal opinion is that China surpassed the US. Although it has not in terms of GDP per capita, but it will soon. Number two, it's on this trajectory where you can't stop it. OK, let's assume all that for a minute. You say adapt. That's a hard one, because inherent in this conversation, you say adapt, you mean lay back and enjoy it, because you don't have a choice. But what kind of adaptation are you talking about? Well, for example, I think the adaptation means that you've got tons of Chinese students coming to the US, for example. Good, OK. We have to adapt to a changing environment. We have to adapt to a fact that one of the most priorities that we have neglected in the US is we need to wrap our educational services. We need to move up the S-T-E-M, science, technology, engineering, and mathematics. We need to get up the curve. We need to understand that there's the internet. So what is happening is that. So we have to look out. We have to look up, because the internet has changed everything. And we have to study Mandarin, too. I mean, we had a show today about Maryknoll School and how they have an immersion class for young kids, teaching them Mandarin right here, the first one in Hawaii. First one is really, that's shocking, it's the first one. You know, I think what I hear you saying, because we're coming to the end of our time, but we should have more time, that we have to adapt means we have to be more like them. We have to think globally. We have to have a plan. We have to send our people out to the four corners of the earth to learn and do influence and do economics, which we are not doing. Perhaps in the same way we're doing, we were doing after the Second World War, you know, the whole Marshall Plan extension there. We're not doing that so much, the multinationals maybe, but that's not the same thing. And so I think what I hear, you can tell me yes or no, I think what I hear you saying is, we have to learn from them at this point. We have to follow what they're doing. We have to extend ourselves, perhaps in a similar way that they are. Well, we have to suck from a pride, first of all. Second of all, it reminds me of my doctor here at Queen's, and he said his son was at John Hopkins University. And I think he's an engineer or something. He said that, you know what, half the class are from England, China, and they're learning. He says he's learning cultures, adapting. That's part of it, you know. And now let's get back quickly to our local community. And I think it's very essential because what I see here is that we've had this brain drain for many years. It's not going to come back. We're not creating industries. Why do kids go to school? And why do they get a vast degree? Because they use it to build a community. So what should we do? Well, we need to do, A, we need to bring in a lot of Chinese kids and STM, science, technology, mathematics, the university. So our kids will learn to be good. Bring in kids from China. China. And that brings in relationships, number one. Number two, what we need to do, if I was a leader, I would start getting Mandarin really widespread. Number two, three, build the relationships. They are very thin relationships between China and the U.S. Send our kids to China the same way China sends their kids to the United States. That's right. I just had two kids that went, they're sons of executives here, business people. They went to China for summer and it changed the perspective of many things. Sure. Made them global people. Made them global. For life. I know one of them is already planning to me, he's going to go back to do an internship there and wrap his language up. But this is what we need here. We need to change the model here. We need to build platforms, number one. Because let's, honestly, what I see is we have in this economy here, we built it too long on a labor economy. Labor economy is made out, that's 60s, 70s. It's no longer living. And we keep re-changing it to say construction. But we're not going to suggest we do technology. We have to. We have to build it now. Our kids will grow to be. The state went through this whole kind of contortion over Act 221 throughout the 10-year period between 2000 and 2010 and roundly, soundly rejected that notion. They didn't want to support it at all. And I feel that, you know, that was the issue then. And I agree with you totally. It is the issue now. And we better revisit that. We better revisit that. And look at what California is doing, the state of California. A couple years ago, I saw Governor Jerry Brown come up to Beijing. And he was talking about what he's going to do with China. And they built an office that really works. They have relationships. They're exchanging industries. And they're learning. Tempus Fugit. How do you say time is of the essence in China? I don't know if there's a saying. Time is also the essence in China. Things are done quickly there, Jay. Time is always of the essence. Thank you, Jay. Thank you so much, Russell. We can do an hour of this. We can do this any time. Fox News. Hey, thanks. Aloha. Aloha.