 Good morning and aloha everyone. Welcome to Law Across the Sea. My name is Mark Shklav. I am the host of Law Across the Sea and today our program is titled China Briefing. My guests are Brenda Foster and Larry Foster. I've known the Foster's for quite a few years. They have a depth of experience and great expertise concerning the events that have shaped present-day China. We're privileged to have them. Brenda, among her many past and current titles, is the former president of the American Chamber of Commerce in Shanghai, which is one of the largest chambers of commerce in the world. And she's presently the head of an international consulting firm that assists Asia-Pacific companies invest in the United States. Larry is the former dean of the UH Law School and continues to teach law in Hawaii and China. And he's recently published a book on the language of Chinese law. I've asked them to brief us on China's current status and outlook in the world. And I want to welcome them. Thank you very much, both of you, for being here. Aloha. Good to see you, Mark. Aloha. I know that you went to China, both of you, many years ago. When was that and what was China like in those days? And then I'd like to move up a little bit and talk about the current events in China and where we are today and what's going on, because we don't hear a lot about China due to a lot of domestic press in the United States now. So what was China like when you first went? I first went to China in 1978. I led a delegation of Pacific and Nation Affairs Council high school students together with a delegation from the University of Hawaii. And we were invited to China in June and we were six months ahead of when the U.S. normalized relations with China. So we visited Guangzhou, Shanghai, Beijing, and it was just fascinating to actually be there and be in China before it actually opened up to the West. And did you have expectations of what it was going to be like and what was it like? The expectations would have been from having studied Chinese language and literature for eight years at the University of Washington and also having studied for a year in Taiwan. So I had images of classical poetry and scenery and a lot of the history of China. When I went there, it was absolutely fascinating because so much of the people there had not seen foreigners in since 1949. They were very curious. They engaged just wonderfully with our high school students who would sing songs from Hawaii and talk with everybody. We hiked up into the mountains to tea villages, sat and talked with people. So for me, it brought everything I had studied in college and for my degrees to life. And it was just wonderful to see it that way. Larry, how about you? When was your first time in China and what was it like? Yeah, let me back up a few years before that, ten years before that. We in 1978, 1968, there's a decade earlier, we went to Taiwan for the summer. You and Brenda? Yeah, to do language study. That's actually where we really first got to know each other. So when we left Taiwan to come back to Hawaii, we stopped in Hong Kong. And when we were in Hong Kong, we went up to the border and looked across the border to the People's Republic of China. And that's all you could do at that time. Couldn't get across. Americans were Did you try? No, I tried, fortunately. But our government was not keen on Americans going and their government was not keen on foreigners coming into China. So you could go to the sort of lookout place and look across and see all these patty fields and occasionally see someone working in the patty field. Not a developed country? Not a developed at all, no. I first made it to the People's Republic of China. Then I think I went with Brenda on a trip in their early 80s. It was 81, 82, something like that. China was still very undeveloped at that time. Economically, commercially? I mean, everything. So let's talk about commercially, for example. So let me go back to 1978. There was the head of China then, Deng Xiaoping, was the one who opened China. So there was a grand opening of China at that time. And that was sort of the beginnings of the opportunity for the people in China to develop a private economy. Because under communist rule, there was no private economy. So when I first got to China in 1980 or 81, there was little, if any, private economy. We stayed at joint venture hotels. There were no shops, certain shops that foreigners could go to, and there were very little shops, if any, that the locals could go to. We were not allowed to use Chinese currency. We had to use a special kind of currency that was developed just for foreigners to use. And we could go to the Friendship Store and use this currency at the Friendship Store. That currency was very valuable in some ways in that the local people only had local currency. So they were very eager to get this special currency so they could go to the Friendship Store. And use it to buy goods that they couldn't normally get. Right. Right. So as you go, occasionally, I can remember going into some of the department stores in Beijing and Shanghai, and just empty shelf after empty shelf of stuff. Very, very few things. Simple things, you know, cooking utensils, bedding, something like that, but very, very little on the shelves. And if you went to the Friendship Store, you could get fancy foods and all these kinds of things. So part of the story of the changing China is this development of the private economy. And one way to see that is the symbol of that is neon lights. Shanghai was the first to get neon lights. And I forget when we first noticed that. But maybe in the mid-80s to maybe around the mid-80s, that the private economy was coming. There were restaurants that you could go to, shops, advertising, advertising. So Beijing was still a dark city. But Shanghai was starting to get lit up. So as you flew into Shanghai or drove from the airport into downtown Shanghai, you would see these lights and stuff of the private economy kind of coming forward. Because as Larry said, too, I mean, the fruits, there wasn't a lot of fruit or vegetables. Everything was seasonal. So depending on the time of the year, you were in China in those days that you'd only see cabbage or watermelon. Most of the Chinese had to use ration coupons to stand in line for meat, for rice, this sort of thing. So on my very first trip in 78, we stayed in an army barracks off the Bund. There was only one other hotel, and I think it was the Peace Hotel at that time, on a friendship hotel, I believe. But we were in the army barracks. This was in Shanghai? In Shanghai. We were in an army barracks off the Bund. And you folks were way ahead of the curve on this, it seems to me. I mean, because you were there before Kissinger went, isn't that right? After Kissinger? No, I was there before Kissinger went. Kissinger had been doing some of the initial shuttle diplomacy. But I was there in June, and they didn't normalize relations until December of 1978. I mean, that actually sounds like a story in itself, how you got there. And you were with a bunch of kids. We had high school, we took high school students, actually the trip was arranged by the US China People's Friendship Association. And the fact that Hawaii had had a long standing relationship with China enabled Hawaii to be given an invitation by the Chinese to bring a delegation in as part of the initial people to people diplomacy that was being initiated between the United States and China, leading up to normalization. You know, and when you talk about that, it sounds to me like Hawaii had a big advantage. I mean, that's the first I've heard about that trip. And it sounds like that connection between China and Hawaii is something that we could use or we could take advantage of, if you will. It was a long standing relationship going back to the fact that Dr. Sun Yat-sin had lived here, twice had gone to school here, had raised funds for the revolution prior to, you know, the establishment of the People's Republic of China. This was back in the early 1920s. But also over the years, there were several families here in Hawaii that had relatives still in China, and they were able, through various means, to be able to stay in contact with them. And also through a travel agency here, I believe it was Koji Arioshi, they were starting to work on developing relations and getting on the ground floor. So Hawaii had a distinct advantage over many of the other states to be able to establish this relationship. There was a lot of aloha, and there still is, in China for Hawaiian people from Hawaii. I've noticed that, too, in my travels in China. So the time you went there, the first time things were not developed. There were, it was more of a working class, if you will, type of society. Is that right in my perception? Yes, everybody wore a while suits. It was what I called blue, black, or gray. That was what everybody wore, all, you know, very much mouse type suits, very industrious, except Shanghai. Shanghai, underneath at that time, had a little bit of vibrancy. There was some color in Shanghai, and there was just a whole different feel about Shanghai, actually, than there was with Guangzhou or Beijing. Okay, well, let's move to Shanghai. You actually went there. You both lived there for seven years? Eight. Eight years. When did that start, and how did that get going? How was that, and what was China like then? I mean, what year was that? 2005. We lived there from 2005 to 2013. And had there been much of a change in that period of time, since your first encounter with China, being on the ground in China? Oh, there'd been a dramatic change. I mean, you had a tremendous amount of foreign direct investment into China. You had high rise buildings. You had bridges. You had freeways. It was just very much a modern city. You could still walk around Shanghai and see traces of the old Shanghai in the alleys in the back or various homes, but there was a thriving economy, and there was a big private economy that was run by what I would call the mom and pop stores or SMEs. It was very vibrant, and Shanghai always had this can-do attitude. They were always a little bit different than Beijing. Beijing was far more conservative because the national government was there, but Shanghai was always about commerce and always about business. And you were the head of the American Chamber of Commerce. Yes, I was the president of the American Chamber of Commerce there. Larry, you were dean of the law school at that time, but you were the professor at that time. I stepped down as dean. So Brenda moved out there in 2005, and we set up an arrangement, and the university was very generous to me, where I would teach at UH in the fall. And then from January to August, I would be in Shanghai with Brenda. So when I first went out there, I was looking for employment, and I started working at a Chinese international law firm in Shanghai. Okay, and what, you know, before we go on our break, give me a little bit of a brief on what China was like to you as a law professor. What did you see that was different or new or had changed since your first encounter? Yeah. Well, I think Brenda's touched on this already, but really just the development of the private economy, the development of infrastructure. When we arrived in Shanghai in 2005, there were two subway lines, number one and the brand-new number two. When we left in 2013, they were finishing line number 18. So just amazing infrastructure in the freeways and high speed trains and all of this. Okay, and let's take the subway through our break, and then when we come back, we'll talk about what's happening now and tell me a little bit about the current prospects for China. Okay, thank you. Hello, I'm Richard Emory. I'm with co-host Jane Sugimura of Kondo Insider, Hawaii's weekly show about association living. The purpose of these videos is to educate board members and Kondo residents about issues relating to association living. We hope they're helpful and that they assist in resolving problems that affect the relationship between boards and their residents. Each week, Thursday at three p.m., we bring you exciting guests, industry experts, who for free will share their advice about how to make your association a better place to live and answer a lot of very interesting questions. Aloha, we hope you'll tune in. We are back with the fosters, Brenda and Larry Foster, who have spent a good deal of their professional life in China, and we've talked a little bit about how they got there on this journey, and now we're going to talk about what's happened in China. So, folks, Brenda, when were you last in China and what was it like and what has changed? What are things, what's going on in China? We were last in China in November. We were actually there for Thanksgiving. We had meetings in Shanghai and actually Hong Kong also, so it was fun for us to be able to go back, see everybody, talk with people, assess the business environment, and actually a lot of the political environment and how the current political environment, Beijing, might be impacting the business environment there. We had heard a lot of stories about U.S. multinationals or U.S. entrepreneurs going there and that business was getting more difficult to do in China. Difficult in what sense? Difficult in the sense that there were more rules and regulations, less transparency, much slower internet speed, and it was becoming more difficult to establish not only joint ventures and contracts, but just to be able to work in general. And that's on the Chinese side? Yes. The government side, I should say, because I make a distinction between Chinese populace and the Chinese government, but so I'm hearing that the government is being more restrictive from the government, or that's the impression you have. The impression I had, and especially in all of our meetings, that in talking with people and in talking to various companies representatives, was that it was becoming more difficult to do business there. So much a lot of it to dealt with the access of information, access of data. Let me ask you the dumb question, why? Why? What's going on here? Because my experience with China has been that it's moving forward at a rapid pace, and that's what you told me before our break, and then now something's happened. Economically, China has been working very hard to reach out globally. I mean their establishment of their Asian Infrastructure Development Bank trying to bring various countries around the region for their own version of TPP called RCEP. But what is happening domestically is a lot different. They're clamping down on the internet. They're making it harder for exporting and importing of goods and services in terms of working with companies. They're demanding much more access to proprietary information of foreign companies coming to work in China. And they're just trying to control their own domestic environment much closer. In spite of the fact that every holiday their populace travels all over the world and they have access either through VPNs to bypass what we used to call the great China firewall and the rest. But I definitely noticed two things when we were there different from when we lived there and were working there. One, one of my Chinese friends told me that when we lived there for those eight years those are now considered the golden years and that they're gone and that they're not coming back. That's number one. Number two, there wasn't as much vibrancy. I noticed it with Larry. Things Western. They are wanting to have more things domestically grown so to speak. Not importing so many Western ideas and values but having it more how would I say this come organically in China. So I saw very very very much a pullback on things Western. Now are there restaurants and five star hotels and things people could go do and do? Yes, all of that is there. The people are just as friendly but I sense a slowdown. I sense the slowdown in the economy. I sense a slowdown in terms of with the people. How far they were willing to venture out what they were able to go. But I have great faith in the Chinese people in terms of what they're going to want a structure also for their country not just the policies that are impacting them coming down from Beijing. Larry is that your your impressions also? Is it your feelings and it sounds to me I mean is this a party a communist party movement or is this a I mean is there a distinction between the party and the government? Yeah, I'm not a political scientist so I won't get there but I agree 100% with what Brenda is talking about but there's really just sort of a different different sense and feel in China now. The government really is trying to reassert the role of the party reassert the role of the central government and be more controlled. One very small example of this is this concept translated into English as and social credit. Everybody every citizen in China has a file and you have so many credits social credits in that file and you can add to them by being a good citizen or you can lose credits by being a poor citizen. Who keeps the file? The the government. I see. It's the government. I'm camera which agency maybe public security but it's very much a clamp down. You talk about the internet. One of the big stories of China while we were there was the rise of social media. Right. We were there just before the Olympics and there was a big earthquake out in western China. The government tried to hide all the damage but there were bloggers who were out there with their cameras and posting stuff on their blogs and the government was trying to control that information. Unsuccessfully as it turned out. And now the internet really has really exploded in China. There are more internet users in China than population in the United States. 400, 500, 600 million people on the internet in China. They have their own social media stuff and the government is very concerned about controlling social media. So each social media account has to be tied to your citizen identity card so that they know who is saying what about whom. So they can shut down various sites or social media accounts should that be necessary. It's a real clamp down. Politically, culturally, economically. What have you. Well based upon what you told me the golden period I was there and I saw that and now what you're telling me is very surprising to me. What I would add is up until recently actually Xi Jinping taking over one saw a really vibrant economy but along with that vibrant economy in China was a lot of corruption in the Chinese economy. And one could call it corruption. One could call it the cultural aspects of doing business in China on paying favors or taking care of your friends this sort of thing. And there were several very well publicized international cases on the corruption that was taking place in China. And one of the things when Xi Jinping came to power he said corruption can ruin the party. So I'm going to underscore what Larry said for Xi Jinping and the current party leadership the party is all powerful and saving the party keeping the party in power it is what is paramount to them. In doing so, there's been several purges and they've been going after the corruption but instead of doing it more according to a rule of law though they like to see that they're using the law and developing more court systems and maybe something that we would see in a more different type of democratic process of a rule of law they really are just throwing people in jail and clamping down. Now in doing so China's always had this phenomenal entrepreneurial spirit as I call it and in doing business but people are hesitant to do business because they don't know now who's looking over their shoulder or watching and I have heard stories of people I know who were at very high levels in the Chinese government who were not involved in any of the corruption scandals but yet they have this self-criticism is back like Larry was talking about social credit they've now instituted in the various ministries government the rest social criticism or self-criticism again actually that is doing your own performance review so as you do your own performance review your colleagues might be looking over their shoulder and say well that's not true they took a trip and I don't know how they paid for that trip so you see it pulling back so for government officials to travel they have to go through several hurdles to get those trips approved they still are very much interested at the provincial level in terms of working with western companies whether it be from the United States or Europe or wherever because they want to develop it a lot of the provincial areas still need that development but in your larger cities Beijing, Shanghai, Guangzhou you'll see it pull back a lot but you can do a lot more business in the provincial areas but again you need to know who you're working with and what what the rules of the game are going to be so what I hear is that these changes are unintended consequences if to use a phrase of trying to maintain the party control or maintain government control and avoid some bad aspects and by doing that you go one way and sometimes the results are not what you anticipated so it doesn't doesn't sound like this was intended pullback it's just an unintended consequence no I think it was intended pullback because at the universities professors can no longer access the internet to talk with their colleagues around the world for research and the things that they're doing people who had been fostering relationships with universities around the world are no longer able to do that they want to organically grow everything at home there's in the universities there's curriculum reform to re-insert party values and downplay western concepts of things like democracy what have you so so you each have friends that you've you've left in china I know you've made friends there and you've probably talked with them and just generally what are they thinking where are what are they thinking about china where do they want it to go what do they what are their hopes for their children their hopes for their children are what any parent would have are their hopes for their children they have an excellent education and a good job and a good life they're the people who can afford it very much want their children to go to school abroad starting even at the elementary school level or secondary school level not just university level so they very much want that but one other friend of mine said when the cold wind from the north blows from Beijing everybody bundles up in a blanket Larry you have a minute to tell me what you think about so the cold wind so on on the law reform side the term has come up now sort of hi hibernation the law the law reformers have gone into hibernation it is physically dangerous to be advocating certain parts of democracy and things like that in China okay well look I want to thank you both for giving us this update and hopefully we can do it again sometime thank you very much thank you our pleasure