 This is Think Tech Hawaii, Community Matters here. Welcome to Think Tech Hawaii's Law Across the Sea program. My name is Mark Shklav, and I am the host of Law Across the Sea. Today my guest is Kai Wong, and our focus is Chinese investment, and more particularly, the China-Hawaii Economic Road, as I would call it. Kai is originally from China, where she went to school, she graduated from university there in law school, I believe. And she's presently an attorney with the Hawaii law firm of Carl Smith Ball, where she is a partner and chair of the Greater China Practice Group. For nearly a decade, Kai has worked in the Greater China region on cross-border transactions in international law firms and as an in-house counsel. Most recently, Kai served as vice president and regional general counsel for Starwood Hotels and Resorts, where she oversaw all legal affairs within mainland China, Hong Kong, Macau, and Taiwan, and was named by a legal publication as one of the most influential and innovative general counsels in China and Hong Kong. Welcome, Kai. Thank you for being on my program today. Thank you so much, Marika. Thank you so much for having me here. It's great to be here. Well, I've been looking forward to it, and I'd like you to tell me a little bit about your background and how you got to Hawaii, and how you got into law, how you got into Hawaii, and then I want to go into Chinese investment. Right. You had a study so well, you know, through your really nice introduction that pretty much summed it up. You know, I first came to Hawaii in 1994. That was after my law degree, getting my law degree in China. Of course, back then, you know, it was when I was young and always fresh eyes or wanted to explore the world, I was really fortunate to come to Hawaii, as they say. You know, my first step into the US got me into paradise. So it's been two years getting my master in agent studies. And then I realized, because I also had a law degree back in China, the best career advancement or, you know, development might be to go back to law school. That explains why I went back to law school. So I spent three years in returse law school, got my Jewish doctorate degree. And you graduated here from our law school. And then you went to work at a local law firm. Right. I was really fortunate to, you know, got this really good summer intern, my second summer intern at Carl Smith Ball. And I was fortunate to get offer. And went on to become attorney. I spent, I think, you know, made partner. So I joined Carl Smith my first time around, I should say, back in 1999. And I made partner in 2006. Wow. Yeah, Carl Smith's, I have many good friends there. Jerry Sumida, who's been on this show, and is a good friend and good mentor to me. Jerry is a good friend. Yeah, yeah. So you were at Carl Smith for a while. Then you took a break from Carl Smith. Then you went back to China. You know, there are two nines in my life at this point. I worked for, I was with Carl Smith for nine years. And then I left Carl Smith for nine years. And now it's a homecoming. I rejoined Carl Smith, returned to Hawaii. Carl Smith is a great friend. As I said, it's a homecoming. It was my professional home. And you're back here in Hawaii. I was back here, yeah. Which is great. Which is great. Right, nothing can be that. We are the oldest law firm in town, 160 years. We're celebrating 160 years. We're always a pioneer. We welcomed the state's first female attorney back, I believe, in 1888. And now we're launching this, we're the first. We're launching this Greater China Practice Group. Yeah, now tell me what you do in that practice group and how can you help people, especially those from China, who want to come to Hawaii or the United States? How do you help them get into business here or make investments? What do you see as your role in that? Absolutely. With my experience, having worked and lived in Asia, not only China, you know, Hong Kong, Beijing, Shanghai. For the past nearly a decade, really, I have developed experience and skill. I gained experience to really act as the bridge for both communities. You know, I see the Chinese investor community as well as the local community. You know, when I see the local community, I don't mean just the Hawaii community, but also the US, sort of the business community in the US. And more importantly, I feel, because for competent and smart lawyers, there are so many. In fact, the US is having an oversupply problem for lawyers. But I think what's most important for us would be, we have that culture fluency. The culture knowledge, really the cross culture, bi-culture knowledge and fluency. So as to allow us, you know, this platform, my team, that firm, to really act as the culture translator for both business communities. Right, and you've come across the sea from China to Hawaii. Twice over. And then back, and then back again. And so you've had all that experience and all that background. And now you're looking forward to what's gonna happen next with our relationship. And tell me, what is gonna happen next? What is the relationship? What's the economic relationship between the United States and China from your point of view? From my point of view. I think we're living very exciting times. Never before seen you have, I mean, I count myself really fortunate to be able to witness the transformation. Primarily, the transformation comes from the China side. But I do see great potential, great possibilities for the bilateral trade between China and the U.S. to flourish. But again, it takes two to tangle. I think China is ready, China is wailing, and over the past four decades, they've gone through essentially an economic miracle. They developed that capacity, that deep pocket, or the desire to come out. But right now, it seems that the U.S. is having a slightly closing door policy. Right, right. I mean, we have President Xi on one hand, and President Xi on the other. And there's a lot of money in China, a lot of millionaires being developed. And they're looking, I think, for ways to spend the money. I mean, what is it, do we have an open house here in the United States? Let me just say there's a void on the sort of international stage. Through anti-globalization sentiment a little bit. Unfortunately, in this country, there seems to be a void left at an international stage. But I think China is ready to sort of seize that opportunity to come on stage. China's ready. China's ready. And we hope that they will be received here in the United States. What type of investments are the Chinese out there looking for? Well, you know, you have a lot of money. Right. And you're looking for investments outside of China. And I want to ask you why, but what type first are they trying to find? You know, we have so much to talk about, but for now, in response to your question, let's focus on, you know, sort of the sector's survey. And then I have to start with, you know, Chinese investment in figures, in numbers. We're just looking at the last 12 years. You know, starting from 2005, all the way to 2017, China had to spend a combined 1.6 trillion USD, we're talking about, you know, astronomical figures, we're talking about USD. But, you know, in both M&A, M&A acquisitions as well as construction, some people would say that you minus the construction because that's not equity investment, right? You know, that's the service providing. But still, you know, even if you minus that, it's still a large figure. And 2016 really saw a rapid year of the modern acquisition activities. Globally, you know, we're talking about more than 200 billion USD. That's how much they've spent. And, you know, it comes down to the US. Last year alone, US was able to attract 55.6 billion. And 55 billion, or 50 billion of the total, you know, money coming into the US actually went to the real estate market. That includes both commercial real estate and residential real estate. So we are sort of zooming in to the US situation. But globally, in terms of different sectors, you see a evolution, you know, over the past sort of 12 years, you see a evolution, they started out prompted by the government's going out policy by acquiring or, you know, looking into natural resources, energy, utilities. That started out as really the desire to stockpile, you know, natural resources. But then, you know, as the domestic economy evolves, they are going through right now a sort of upgrading process for the economic model. So they are sort of, you know, you see there's a migration from the energy, utilities, manufacturer-driven focus to this consumer-based technological, you know, media, entertainment, more towards lifestyle. And that first round of investment going out, looking for resources, I guess, that was before President Xi. That was before, and it primarily sort of, you know, focused on every kind, the continents such as Africa and Europe. And we saw, you mentioned that there was a lot of real estate investment. Now, is that, can you, is that a cultural thing, or is that a, what is the reason for that? Why are, why is that a big investment? Thank you, Mark, for identifying that. I think, you know, that qualifies for you to be, you have Chinese. I think, you know, it's in the dirt, in the blood, you know, for Chinese to buy dirt. You know, they have 1.4 billion people at home. And the size of the country is actually slightly smaller than the U.S. And the density, you know, in population. So psychologically, I think, you know, if you look at the Chinese psyche, they gravitate towards real property, something more tangible. But, you know, there is also an economic reason for that. Especially in tier one cities, such as Beijing and Shanghai, back home, the property market, you see, has scarred, I think, in terms of price. So now they're looking outside the United States, I mean, outside of China in the United States for maybe a better opportunity. Better parking, right. That makes a lot of sense. It does. So that actually leads to a lot of, you know, reasons or rationality behind this shopping spree, you know, so to speak. Some people call it the outbound shopping spree, you know, by Chinese investors. Primarily, I would like to narrow them down, you know, all the drivers into three different drivers. The first one, of course, is a, you know, political driver. There is a concept that's been touted by President Xi, ever since he started his first term. And that was back in 2013, so five years ago, four or five years ago. Basically, you know, he launched a call in this term called a Chinese dream. Chinese dream. Chinese dream. Okay, now, I want you to wait. Sure. And we're gonna take a short break. And then I want you to tell me what the Chinese dream is. In the context of the drivers. Yes, yes. Absolutely, my pleasure. All right, so we'll take a little break and then we'll be right back. Thank you very much. Thank you. And it's gonna be great. Early arriving for a little tailgate. I usually drink but won't be drinking today because I'm the designated driver and that's okay. It's nice to be the guy that keeps his friends in line, keeps them from drinking too much so we can have a great time. A little responsibility can go a long way because it's all about having fun on game day. I'm the guy you wanna be. I'm the guy, say good morning. Welcome back to Law Across the Sea. My name is Mark Shklav and today I'm here with Kai Wong and we're gonna talk about the Chinese dream. We have talked about and we've heard about the American dream. Kai, what is the Chinese dream? I'd like to know what that is. Sure, it was almost like a counterpart to the American dream but it differ in so many ways. The direction now behind the launching of this idea by President Xi Jinping was really to, I mean the central objective is to better the living standards of Chinese people and also to develop the country economically so that China would be able to play rather central role on the global stage. While there's also a deep culture sort of relevance to that as opposed to the Westing idea of democracy or I guess human rights. So they wanted to develop this reverence to Chinese traditions under the Confucian teaching. So essentially in my mind it differs with the American dream in that Chinese dream in the minds of the government is actually well going to be, it's going to be facilitated by the government, by the state, by the nation state. As opposed to the individual in the United States. That was so pronounced in the American dream philosophy. Okay, yeah, please go on. Sure, essentially they, as a political driver, I think I mentioned this before, there are different legitimacies to justify the existence of a regime. So talking about around 1949, that was pretty much a charisma-driven legitimacy. Right, relying solely on the charisma of Chairman Mao. But for the subsequent generation of leaders in China that's not there, it just wasn't there. So they relied instead on the so-called performance-based legitimacy. Performance meaning economic growth. The ability to bring well-being to the people. There's a deeper actually culture tradition in that. So for many people they view, China doesn't have the tech and balance system. But there has always been one. It's just, it's different from the sort of three different branches of the government that's in existence in the sort of western political civilization. Back in China, this idea of mandate of heaven was first developed by one of the major disciples of Confucius, Mencius, both of the sages actually are from my home province, Shandong. I'm enormously proud of that. Well, that makes a lot of sense. Thank you. So the idea of mandate of heaven is really, it's a vertical, it's a vertical accountability. Essentially for a ruler, for ancient dynastic emperors, they have to carry out what is called mandate of heaven really to benefit to the people, service the people. And if they are not doing a good job, the people, the mess, the general populace out there, they're entitled to overthrow the dynasty. So it's essentially sort of a vertical sort of a tech and balance system. So that's a different check and balance that I've learned about today. It was rather volatile, I mean, you know, revolutionary. So that's essentially to maintain that legitimacy Chinese government has to, I wouldn't necessarily call it a global expansion, but they have to develop the economy. And so that actually leads to the second driver, which is the business driver. The business driver behind this would be, you know, over the past four decades, they had gone through this economic miracle. They established, I mean, they were able to accumulate all that public wealth as well as you know, private wealth within China itself. They've experienced sort of limitations over capacity, limited return. As a result of that, they have to come out. In order to compete with the, you know, global giants like Samsung, Amazon, they realize they have to, even for like enterprises, you know, doesn't matter whether it's state-owned enterprise or private enterprises. In order to build that globally known brand, they need to come out through overseas murderous acquisitions. Yeah, and they need to show their face outside of China. Absolutely. Yeah, okay. And also, you know, diversification would be a good direction now. And as China's currency, RMB, is devaluating, they needed to find, they needed to sort of diversify their portfolio to also include assets that's denominated in a stronger currency. Makes a lot of sense, you know. It makes a lot of sense to see the insight that you've given into the reasons why China is moving outward and making these investments. And there's one more driver, what's that? The last banali driver, so to speak, is the human factor. As a result of that economic growth, they were able to accumulate so much wealth. You know, a few figures, I think, you know, they have, over the past five years, I think they have accumulated like 165 trillion. That's in RMB, private wealth. And if you look at Forbes' list, China has the most, if not the most, I mean, overall figure is probably number one, you know, the billionaires. Of course, you know, Chinese women, right? They, China has the highest number of self-made female billionaires. I'm talking about self-made, not a thorough marriage, not a thorough inheritance. So they have to spend all that money. And you know, over the past, how many years? And also for so many generations, they've been so deprived. So it's time for them to come out, to be enjoying, you know, the final things in life, to really live life to their fullest. Good opportunity, good opportunity. Absolutely, good opportunity. That really explains it for me, and it gives me a good background, an idea of what's happening in China, and actually takes it a little bit beyond the government and party to me, and a little better understanding. Now, let's say you have a Chinese client. What do they, you know, they come to you, what are my problems? What should I do? I wanna make an investment in the United States or in Hawaii. Right. What generally would you tell them? I would say that, you know, in the New York generation of Chinese investors, they are savvy, they're really smart, because they've gone through, they've seen so much back home. Of course, you know, there are limitations. It's hard to portray a single dimensional sort of prototype Chinese investor, because, you know, they're really all over the map. You're talking about institutional investor, you're talking about private investor, individual, summary funds, SOEs, state-owned enterprises. They all demonstrate different traits. But once some of them, language, for some of them, language is not an issue. They hire the best management team, you know, they hire the best talents. But, you know, for some, for others, language, you know, you need to sort of, you know, to help with communication. So that's just the linguistic dimension. But then there always comes the culture, translation, dimension. So when a Chinese investor, you know, a Chinese client comes into the door, most often, I mean, it's already too late, because they don't realize how important it is to seek assistance from legal professionals until they have signed a deal. So that's the biggest problem. They should contact you before they ever start moving forward. You know, the legal and regulatory system in the environment is so different from back home. So it's vitally important for them to really surround this. You know, I would, if there's one single advice to the investors, to the Chinese investors, really is to surround yourself with the best team. It could range from legal, financial, you know, communications and technical advisors. That's the best way to learn from the best. Now, with respect to Hawaii, what are we looking at in Hawaii? Do we have Chinese investment here? Is it a good thing for Hawaii? Do we want more? Do we have any advantages just being in Hawaii? Is Hawaii a good place for Chinese investment? Lots of questions. Let me try to break them down. Yes, it's real. You know, we do see lots of Chinese investments. Let's look at the data one more time. Over the past 17 years, you know, from 2000 to 2017, apparently, you know, there are a total of nine deals taking place in Hawaii with a total value of 819 million USD. Of course, compared to, you know, more attractive destinations such as New York and California, it's really small. But they sort of conversely, you know, on the other side of the coin would be, I see huge opportunities. And number two, it is a good thing. I mean, I could spend all day trying to convince everybody it's a good thing, but I think the most important thing I ever heard is from one of the salesperson I encountered at a Moana Shopping Center. She just nailed it. She said, I think it's a good thing. They are putting money into Hawaii without taking away jobs. I think, you know, that's a really common sense straightforward, succinct way of summing it up. In terms of the future, let's talk about Hawaii, what Hawaii has to offer, so to speak, the advantages of Hawaii. I see so many. Number one, you know, cultural similarity. Is Asian predominantly Asian sort of oriented in terms of value, population, we do things, it's kind of community. Number two, you know, much better climate, beautiful place, rich tourism resources. And number three, as I mentioned, you know, they haven't invested too much into Hawaii. That translates into potential. Right, right, and now they have somebody who knows about them and can help them. And I'd like you to leave us, if you would, with some, you have a Chinese proverb, I love proverbs and sayings. Do you have something that you could give us that will perhaps give us some guidance into the future? Absolutely, I do have so many, you know, my favorite Chinese proverbs. But I thought, you know, for today, I'll focus on this one. Four character proverb is called Shang Shan Ruo Shui. The strict translation is the best of men is like water. It can also be translated into the greatest benevolence is like water. I was rather inspired by my idol. You know, if there's a certain thing called my idol that would be Bruce Lee. I was watching this interview Bruce Lee, given he was talking about, you know, the power of water. You put the water into a cup, it becomes a cup. It could crush, it could flow. It's a shape-less, but it can also penetrate. It's rather powerful, yet it could be gentle. And it's also a common denominator of all of us, all across the world. It's an agent for life, it's a cult of its life. Well, Kai, thank you so much for being my guest today. I learned a lot from you and I appreciate the opportunity to talk with you. Vice versa, it was such a pleasure. Thank you. Aloha.