 Good afternoon, my name is Ray Tsuchiyama on a beautiful blue day in Honolulu, Hawaii. And this is Think Tech Asia, a series that really links us to China, the People's Republic, in the year of the Rooster, with exciting topics as we move into this year. It's already March. And we have Russell Liu, my co-host and traveler of all regions in the globe, based in Beijing for the show. He also has an innovative entrepreneur from the US, living and working in Beijing. And Russell will be talking to him throughout the show with us. And we're going to be delving into the upcoming President Trump Xi Jinping meeting in Florida that's coming up very soon on the heels of Secretary of State Tillerson's visit to Beijing just last week where he met the President Xi Jinping and the foreign minister to have talks on trade, politics, and setting a stage for this two-leader meeting in the new future. So Russell, are you there in Beijing? Hi, Ray. Hi, everyone in Hawaii. Can you introduce Philip and tell us what is he all about for the show? Yes, good morning. Welcome to Beijing. It's a beautiful morning in China, in Beijing today. We're in Shandhi, China, in the high-tech area sector in China. I'm really fortunate this morning that we have Philip Liu on my left. He's the US executive CEO of a company called Exfield Soft, a software-tested company. And he is CEO, he has been here over 10 years. He brings a lot of expertise, so I thought it'd be great to introduce somebody who has a background who can give us a little more inside knowledge of what's happening on the ground here. In so far, we're talking about the new President Trump, his invitation to Xi Jinping, who will be coming to China in a month or so. And so I'd like to introduce Philip Liu, who is an executive of Exfield Soft. Good morning, Philip. Good morning. Good morning, Russell. Thanks for the intro. I'd like to ask you a couple of questions, Philip. Could you tell me, what does your company Exfield Soft do here in China? What does it do? Well, we have an engineering center here in China, and we do software testing. It's a service that we provide to mostly US companies and companies in Europe that develop and make software, but they don't necessarily have the time or expertise to do thorough testing. And so that's a service that we provide, so we don't actually make products, it's just a service. And Philip, I'm curious, because for our audience there in Hawaii and the US, are you operating a US company here, or is it considered to be a Chinese company, it's organized in the Chinese class? Well, I mean, we do have a US company, but we have a Chinese company here called a Wuffy, which is a wholly foreign enterprise. And so the rules of a Wuffy are that a foreigner can own 100% of the enterprise, but it's classified differently, and sometimes we have different rules that apply to us. Sometimes they're good, and sometimes they're bad. So it's a way of doing business in China? Right. For example, a Chinese company likewise went to the US, they went to California, they would have to incorporate it as a California company to do business in the US, presumably it's the same thing. Similar. Right. So for our audience, we've lasted longer and survived and prospered probably longer than most companies. Okay. And to our audience, with what's happening on the stage in the US, President Trump has just invited Xi Jinping to come to the US. Could you tell us, what are your thoughts on that? How does it affect businesses such as yours, American businesses which operate in China? Maybe from a business standpoint. That's a big question. From a company's standpoint in the IT domain, resources and smart people are always a constraint. And so from our point of view, I'm always thinking about how is this going to affect the graduates coming out of school and the tightness of the labor market and the competition here because we have a lot of competition, a lot of upcoming Chinese IT companies. So if the talks somehow impact the flow of goods and services across borders, now to me there's a lot of uncertainty there as far as our customers being in the USA and being able to and wanting to buy services from us. So just a lot of uncertainty. And one of the campaign promises that President Trump made and he's repeated many times is to bring back the jobs home. For example, in Mexico, President Trump is putting pressure on American companies to stop investing their companies. These jobs should be in the US. So do you foresee a possible change in environment here where the president pushes American companies to tell them that these jobs should be back in the US? Could you operate in the US? Well, anything is possible. We could operate in the US, but we have to think about what that means. And when I think about the USA and I think about the labor market as compared to here, my parents are from the Bay Area in San Francisco, so I say, okay, so what if I go to San Francisco and I'm in the office there, right, that, you know, maybe our labor rates would be 10 times higher or five times higher in order to get the same quality of engineer. Now we could do something that's called the nearshoring, which means locating an engineering center in a more remote location in the US, say Iowa or Arkansas or something like that. But then you have the problem with the quality of the people in terms of their education in order to do the kinds of things that we wanted to do. And it would be hard to find those kinds of qualified engineers in remote places. So we would kind of be stuck between a rock and a hard place in terms of finding the people that we need at the cost that we can provide services that our customers would be willing to pay for. Do you think the US is ready to do that with many companies to uproot from China where it's been operating many years like yours for 10 years, and immediately go back to the US? Could you survive? Could you think American business is going to survive? Or does that mean the death of many businesses, which bring value added services or products because it's just the fact that they are not in the US or in China? Well, it certainly would be very hard we'd have to reinvent ourselves and thinking about where we would get the kinds of people that we need. Maybe we might even have to change our whole business model, I really don't know. That's something that I want to approach right now or even think about, it just would be very difficult. And so really what you have is what you do here, software testing for US and other international companies. Really, you have an export, and that export really are services. That's interesting that you mentioned that. Yeah, I mean it is an export of services, and China actually has a classification for that in terms of an export company. We're not classified purely as an export company in China, we're classified as a high-tech company. But if there were some kind of a blanket policy for US companies buying stuff in China or buying stuff or services, it certainly would cloud the waters for us. I think about, you mentioned President Trump encouraging companies to do manufacturing in the United States and the jobs and things like that. I mean, for me, I have to think about, I think that we should think about, Mr. Trump should think about the kinds of jobs that are going back, that he wants to move back. The kinds of jobs, working in factories, those kinds of jobs really don't exist anymore. And what will happen is, if you want to pay them the American rate, whatever that happens to be, which is much higher than where it currently is being done, that's going to force a lot of unforeseen things happening, like mechanization and so forth. So it's a complicated issue. So with today's technology, what I'm seeing in China, a lot of automation, a lot of computerization and manufacturing. So if we're talking about pushing American companies to manufacture, to return to the US, that possibly means a lot of capital investment in the infrastructure, which may not exist. And it's going to happen at some point in time. So do you think there's possibly a gap here of so many years before US can actually build its manufacturing capacities? Yeah, well, the one part is building products and manufacturing and being able to have that whole infrastructure that would support manufacturing our own robots in the United States. You think about all these robots, where do they come from? Well, they have to have an infrastructure supporting them in terms of services and skilled people that know how to maintain these robots and develop software for these robots. So that will require a whole cycle of innovation as far as manufacturing. Now, for our business, which is based in services, I think it's going to also require a whole cycle of innovation in terms of the education. Getting people up to speed to provide these kinds of high tech services is not going to be easy. And right now, you can think about it, if you go to Silicon Valley and you go to any of these large IT companies, most of them are from abroad. But that's interesting what you point out. One of the concerns a lot of Silicon Valley companies had with the recent presidential executive over batting travel from certain countries. Many of the foreign workers, skilled workers, come from these countries. That's right. So I think that we've got to take a look and understand that you cannot run away from two things, globalization and the fact that we have the internet. Knowledge is shared. Knowledge is learned not in the US but outside. Well, I mean, it starts much earlier than looking at the IT companies and the labor force in those companies. If you go to the US colleges and universities and you look at all the students in computer science and engineering, they're also foreign. And whereas a lot of the, I guess you could say the American-born students are in the liberal arts and things like that. And so the ratio of students that come from abroad and the technical fields is higher. So what I've really seen is an underlying message here. That we're actually committing suicide. If we start to force American companies to change their business models, because you rely on a lot of expertise, skill, technology, expertise, and technologies from people who are not in the US. Either you have to bring them into the US to work or you have to relocate outside, for example, China. And speaking about technology, India's on the rise. So they will be on the rise no matter what the US does. Yeah, well, I mean, you bring up some important points there. And I think it's really all about supply and demand. I mentioned earlier about how the prices of labor in, say, Silicon Valley are so high. Now, why are they so high? Because there's not enough good engineers there to get the work done. And so they can charge a lot more. And I think Ray, back in Hawaii, has a software technology background. And Ray, please feel free to ask some questions to fill here. Well, I would love to, but we're going to go into a break. And as soon as we come back from a break in a couple of minutes, we'll delve into this further. I've got the Beagle sisters here with a healthy tip. We encourage you to enjoy the food you eat this holiday season and keep it local and healthy. Yeah, eat the rainbow, eat the rainbow. And if you need any produce, come to the red barn on the north shore. Aloha, my name is Joe Kent. And I'm the vice president of research at the Grassroot Institute of Hawaii. The Grassroot Institute is a public policy think tank and we try to build a better economy in Hawaii. And you can see us on the TV show Ehana Kako on the Think Tech Hawaii Broadcasting Network every Monday at two o'clock. We'll see you there. And let's build a better Hawaii together. Aloha. Thank you for watching Think Tech. I'm Grace Cheng, the new host for Global Connections. You can find me here live every Thursday at 1 PM, where we'll be talking to people around the islands or visiting the islands who are connected in various aspects of global affairs. So please tune in, and Aloha, and thanks for watching. We are back in Honolulu and Beijing. And we have two people based in Beijing over Skype. Russell Liu and Philip Liu. And Philip represents a high-tech company in the B2B sphere. Am I correct? They're selling to businesses, not to consumers. That's right. And so you have a global customer base. Can you break down the percentage? What percentage US, Europe, Japan, China? Well, I would say 90% of our business is from the USA and 10% is from Europe. OK. So what you're doing is being a US company, providing services in the software area to US companies, but leveraging the advanced expertise in software coding in China. That's right. We're leveraging the availability of high-tech, smart, capable resources here. Now, these engineers, how many are Chinese from PRC passports? How many in your center? Well, in our Beijing office here, they're all Chinese. We have one American. But primarily, we're 99% Chinese here. So when you get together for software scrums and quality control, is it in Mandarin Chinese or English or both? It is in Chinese. Of course, we deal with our customers in English. Right. So again, it sounds to me, I've been in situations in Japan and other places where the language is local. But the product is for a global marketplace. Yeah, that's right. I mean, it's not just language, but culture and the way that we work with our clients and so forth. So it's a little bit of adapting, but it makes it a challenge and fun. Right. I mean, software engineering is hard to begin with, to do it in another language or culture in China. But what made it is the particular software engineering programs in Chinese universities that really give Chinese engineers the edge and the management skills, the communication skills, and collaboration skills. Is that the total package? Well, I mean, bring up a big issue, really, which is the Chinese education system and university system. And as you may know, it's very, very competitive for students to get into a good university. And when they get into a university, it's also very difficult, you know, lots of homework and so forth and lots of learning. But as far as the collaboration and communication goes, we have to do that in terms of training them and working with them that, you know, as you know, it's not all about numbers. So there's a lot of skills that are needed outside of stuff that you can run in class. That's fantastic. And Rosa, go ahead. So I just say, Phil, being here 10 years, you must at least have some formula that works keeping your workers who are from China also culturally attuned to the US because, you know, you're dealing with US clients. So understand the US culture. It's almost like a good mix of human resources. And you can do it in here in China, hiring Chinese workers who are actually servicing for US clients. Yeah, I wouldn't. I'd like to think that there's a formula, Russell. We do like to bring our, I guess you could say an American mindset and culture here for things being long term and working long term with our employees as well as with our clients. A lot of our employees have been with us as long as the company has been here, which is very, very rare in China. So we like to have a culture of, you know, a lot of people talk about trust and culture and so forth. But I believe that we really do it here. And that's why people stay. And you've also leveraged your business on the fact that labor costs here would be cheaper than it would be in the US, the operating costs. Well, you know, as we talked earlier in the show, the labor costs here are cheaper than, say, Silicon Valley, but probably equivalent to what they call nearshoring in a remote town of the USA. As I said earlier, it's just a difference in the skills that are available. You know, we do compete against other countries that provide software type services like India and Vietnam and so forth. And we cannot compete against them on price either because they're much less expensive than we are. So we compete based on value and expertise. So based on what I'm hearing, and I'll throw the question out. Philip, if you were there in a meeting with President Trump and President Xi Jinping, and you're trying to keep your company sustained and profitable and in Beijing servicing your clients, I mean, this is all about customer service, right? I mean, you're trying to come up with the best service for your customers. What would you say to both of them? What would you say about your experiences 10 years in China based on your American subsidiary? Is there any list of things that you would like to continue the same or anything new? Well, I mean, I would advise them not to do anything. Too drastic and too fast. But in terms of long-term improvements for both sides, I think China could really work on their education system in terms of providing engineers with more hands-on experience and teaching more soft skills, like I just mentioned. And then in the USA on that side, I think it's really also about education and creating the interest for engineering and computer science. I think a lot of students there just aren't interested in these kinds of topics, which is a shame because it's really shaping the future. But wouldn't you say that about the US also? Wouldn't you say that the same about the US? Which part? About sparking computer science interests and coding in children and having more students study in and college. Yeah, there definitely has to be some type of programs to generate that interest and generate that passion for learning about these things. And I don't think that exists right now. In the US. In the US. Because one could make the argument and I've seen it in China that it's all based on rote, it's on exams. And that you'd never question your teacher and there is no spark of creativity or innovation. Very difficult to learn that in Chinese universities. Or is that changing? Is that changing at all? Maybe I could show myself. That's a big question. And maybe I'd give this a thought to you. When you have about 100 students in your class, do you have a lot of time in class to sit down with each of them and teach them? Or you manage it by memory, test them by memory. And so I think that's a challenge. With the amount of people here, that's a challenge. And a US class. Well, that's a good question. Actually, I think it's before kids even go to school in terms of learning creativity. They say that a child is formed by the time they're 60 years old. And so I think a lot of that creativity in being able to be wrong and being able to be outside playing rather than studying and learning piano or whatever, I think that that has an impact on a child's creativity that is really unknown at this point. But I think it's there. Well, I think the Chinese realize that in China, there are actually tours now, big set of education tours for children in kindergarten to go to US kindergarten to learn and socialize with other kindergarten kids and speak in English. So I think the Chinese do recognize that. But getting back to Ray's question about what would you say to President Trump and Xi Jinping? Are you in favor of globalization? President Trump says, maybe we should back away. Americans should back away from globalization. And we should be more isolation. Xi Jinping at the Davos conference, the major think pack conference, says China is in favor of globalization. So what do you think, in terms of your business experience, globalization or isolation? Well, you bring up some big issues there. I think that globalization is inevitable, actually, in that it's not something that you can start and turn off just by having some tariffs. And that if we do try to stop it, it's kind of like stopping the ocean. It would be very difficult. And there would be possibly some negative impacts from trying to stop it. I think globalization is good overall for everyone because people, it's basically trade. And so we as a human civilization, that's what our economy is based on is trade. I mean, I buy something from you and you get something and I get something. And we don't do it involuntarily. We do it because there's something in it for me. So I think that President Trump is not necessarily considering as big a picture as he could in terms of why is it that people trade anyway? Americans want to buy stuff at Walmart. Okay, and so if you want to take that away from them, then instead of paying $10 for a broom, we're going to pay $50 for a broom. And what's going to happen to the salaries because of that would certainly need more than minimum wage, even at $20 an hour raising the minimum wage. You're still not going to be able to afford to buy a broom. Well, we're coming to the end of the program. Russell, Lou, you want to say something that kind of puts it all together, that what you think will occur at the meeting with Trump and President Xi? Thank you, I think I learned a lot actually from Philip. I learned a lot from Philip because we live in interesting times. We've heard a lot from the candidate Trump about Chata being a currency manipulator. We've heard from his fighters that there should be a barcode. There should be tariffs. We've heard military action. But all of a sudden, maybe this is a time it's a window of opportunity now to sit back and for everyone, including President Trump, to sit with Xi Jinping to start a relationship. I understand. Well, Russell and Philip, thank you so much for your comments all the way from springtime in Beijing. This is Think Tech Asia. Thank you very much.