 This is Think Tech Hawaii. Community matters here. Okay, we're back. We're live. We're here at the four o'clock block on a given Monday. And we are, of course, talking about Think Tech in Asia with Russell Liu, who joins us by Skype from Beijing. He's in a coffee shop there. It's an international coffee shop. And today we're going to talk about the lessons which Canon must be learned from China's latest revolution. That's the innovation revolution, Chinese style. It's real. Copycatting is out. Innovation is in Chinese companies, such as the bike-sharing company. We talked about that a few weeks ago. OFO Otho is going global. It's already in Europe and has started operations in Seattle in the U.S. Success and innovation can be attributed to technology, mostly information technology. Motivated unicorns. Russell will tell us what that is. And billionaires who have the attitudes of the everyday Chinese consumers in mind. So how does China's innovation and its unicorns impact Americans? So for Americans, it's a time to rethink our traditional business platforms. Consider new platforms of doing business which are technologically based and which focus on becoming global. This time, we got to imitate them. What do you think, Russell? Welcome to the show. I think it's something that is exciting. It's something that not many Americans see this. It's something you don't hear much in the U.S. news. But the Chinese are forging ahead. It's a revolution. No longer, it's a copycat culture. That's not it. The big thing these days is that there's a new generation of entrepreneurs who are staking their features on the Internet and also on technology. Well, here we are on the People's Congress. The National Congress is meeting right now. Xi Jinping is about to give his policy speech to the Congress. That's always an important moment. Historically, these speeches have signaled new directions for China, new initiatives. So any ideas about what he might discuss, and is it possible, Russell, that he will discuss this very idea, this idea of innovation for China? Well, I think it's important to realize that the way that the Chinese change their policy, they have a Congress in Xi Jinping, and it's to the credit they actually have been actually progressive and really forward-thinking. Now, it's not only Xi Jinping. It's years ago when China first said, we're going to make English a core language requirement and start in the first grade. Everybody learns English, like math and science. So that has itself started this innovation revolution years ago. And I think something Americans have not seen. Former President Barack Obama said, we should have a second language. That's really because it gives a culture of being global. It stands our vision. It's not just the US. And so that's why these new models from China are really based on what started 40 years ago. When the government said, we're going to have English as a core language. So to their credit, and WTO, all changed it. And it's amazing because that's why China jumped ahead of Japan to take the number two spot because English is a language of business. And English allows the Chinese access to the internet. So the information they see, like Americans, so they can process this and all this combined to help make this new revolution, this innovation revolution. And the China government saw it a few years ago when they have every five years of a 12-year, every few years of a several-year plan here for the country. And they did say, we're going to change it to innovation. We're going to change society to innovation. So they've allowed innovation to happen. Yeah. It's part of Hu Jintao's initiative to create things for the benefit of the Chinese consumer. And I think this is part of that. This is the Chinese consumer. In order to do an innovation revolution as you describe you have to have at least, well you have to have three sides to it. One is that you have to have a tech industry who's been well trained and smart and creative and well capitalized in order to create the technology to be innovative and to be innovative on a level that will reach the whole country. Secondly, you've got to have the government backing it up. And in China, well clearly the government backs it up. I think the government may have initiated it in many ways. And thirdly, you've got to have a public. A public who's sophisticated, who understands about technology, who understands about consuming technology. Who's not afraid of it. They're not running away from it. They relish it. They want to use it. They want to embrace it. And all these three things are happening now. So it's a confluence of factors and events that is giving China a tremendous boost at least in information technology changing the lives of its 1.4 million people. And you see that all the time. I talk about it all the time and I'm convinced that it exists not only in the big cities like Beijing and Shanghai, but in the second tier cities and the cities in the west. And for that matter in smaller cities yet in China. And it's sweeping the country. I mean, am I right about that? Sweeping the country. It's a whole country's in the revolution. And when you think about it with 730 million smartphone cities, it means second tier cities. The people in Xinjiang province. The people in Chengdu, they get a chance to see what's going on in the world by products. And also the government has done a fantastic job of building capacity infrastructure the highways, the freeways, the high speed train, the fastest in the world. It's all in China. So they have done that to it. They've allowed the smartphone and internet to converge along with the physical infrastructure. It means that the whole country is benefiting from this. It's not just a big cities, Jay. Think, imagine what would happen in America if you gave everybody a chance to see the world. And they got on smartphones, whether they're to Little Ohio or whether they're in New York or Boston, everybody built the same page. You see, people, if they have access to buying things it comes by train in the next day or so or airplane. So all these things are needed so that the people are buying into technology. It's a way of life now. The interesting thing is a lot of the technologies we're talking about, which we'll unpack that into a number of companies in a minute, those technologies are consumer technologies and they are technologies by which people buy things just like in this country. And I'm so interested in this one concept we're going to talk about. And that is a lot of these companies, they sound in terms of function they sound a lot like American companies. And their technology is a lot like the technology in the U.S. However, they're fresh. They started recently. They grew in a logarithmic fashion all within the last few years. And now they have displaced the American companies in China and they are actually doing better in many ways in the technology of the American companies. So what we have here is an initiative that is working really well, that is what I want to call it, Chinese and Chinese, patriotic Chinese. You know, stand up China. And this is kind of the next chapter in stand up China. It's something that's going to take China to a new level. It is taking China to new levels. But what I would like to talk with you about, Russell, is the specific companies and how they compare with the American companies. You mentioned a moment ago about the cell phones. So who's making the cell phones? Who's supplying the cell phones? And who's building the infrastructure that lets them talk to each other? And for that matter it carries the internet in China. What's the condition of cell phones and internet transmissions broadband? Well, you know, it's one of the biggest ways to change your China. You know, if you go to Starbucks in the U.S., you see everybody carry laptops to get on to the internet. In China, they don't need laptops. They go everywhere. They buy Apple phones, iPhones for the businessmen. And down to the everyday person, you buy Xiaomi or Huawei. These are affordable smartphones. Now the way the telephones work in China smartphones, I don't have a contract where I've been locked in for a year or two years. I just pay every month, I go and buy credit. I put credit on my cell phone, okay? It suits how much time I need, how much data I need to go to the internet. It suits me. That's all I need to do. But imagine this, when you're not locked into contracts, the contracts are like the old platform where you're locked into some plan, okay? And then what happens is that you have companies that don't push technology. They're not competitive. In China, everything's competitive. The mobile companies, China Mobile, China Unicom, they work with these companies, you know, like Baidu, The Search Engine, Alibaba, JD.com, they use the smartphones at WeChat. They use the smartphone exclusively. It's come a cash to society. We don't carry cash. We just carry a smartphone that's linked into the WeChat for banks and we make payments instantly. So it's a very different society. Well, it sounds Russell that what's happened here is the smartphone, I mean, we think we have a lock on the smartphone. We have the Apple, we have the Android and all that and we have a lot of apps that came out of the Apple initiative. But in fact, for all the activity that we in the United States and in Europe for that matter have on smartphones, it sounds to me like the activity and the personal leverage of the individual citizen all over China on smartphones in China is actually greater now. Both in terms of holding the money on the phone, being able to achieve purchases on the phone and sales and conducting business and doing all the things that all these companies, all of which operate on that platform are doing. So what we have here is kind of a leapfrog. They started out behind us, but now in terms of smartphones, it sounds to me like they're ahead of us. What do you think? Well, I think you're exactly the point, Jay. They're just ahead of us. For example, through technology, through the internet, through the smartphones. In China last year, we racked up 8.6 trillion US dollars of business using the smartphone over the internet. As compared to US, we're talking $112 billion. What does it mean to the everyday citizen? Well, I'll tell you what it means. It means I could be sitting on the subway and ordering something I forgot to order. I want to order maybe some seafood. I have some friends coming tomorrow. I order seafood. It's out of the changing times tomorrow. I forgot the cake today. I need a German force cake. So I will order it from the bakery and he gets it in two or three hours. It's all delivered to my footsteps. Now imagine what I have to do in America. I've got to get the old phone, look up the internet for the phone number, call them up. There's a lot of brick and mortar events in that for the guy that's making the cake. And also the fact is that I have to take out my laptop. It becomes a deterrent to business. If I have to take out my laptop, open my MacBook, power it up, get on the internet, do the search. My God, I wasted time. We've come from a society here that's fast moving and it's very efficient. It's a very different way to organize your life. Everything's moving at warp speed. Who's making these smartphones that are so ubiquitous in China? Is it iPhone? Is it Samsung or is it someone else? Well, the big driver for the smartphone has actually been companies like Xiaomi and Huawei. They've been producing for a number of years affordable phones. You don't need to get an expensive iPhone. Okay. But the key driver really are these internet application companies that create the applications. For example, Tencent created the application called WeChat. And we have things now that it created in China. For example, WeChat and Apple had an issue because through WeChat they would have a tipping box where people when they see a video can tip to that person, make a tip. A lot of millionaires are created through that platform. WeChat didn't make any money. So it's a captive audience. It's building a big fan base. And now Apple has issued something like that through, I believe, iMessage where you could tip off or pay your babysitter or a friend. So we're seeing a lot of Americans copying now the Chinese some of these applications. We're saying just to reverse. But again, Jay, it's exciting because I'm out on the street. I need a taxi. I don't use my phone. Uber is not in China. It's the city choosing is. And with that application I can get a taxi. I can get a car. I can get a bus. Whatever I need to get, I can hail that very easily. And believe it or not, when I call a taxi through this application I see on my smartphone where that car is. For example, you will see the map and you will see where it's coming from. And it will give you a time estimate. All this is in technology, Jay. It's remarkable. But it's making a society. What really appeals to me, Russell, is this notion about the tip thing. And if you're interested in tipping think tank, that would be good. Because this kind of technology would be useful in this country. A lot of people like to tip. And if anybody wants to tip us, we're happy to take the tip. In the meantime, we're going to give a minute to think about that. Maybe receive some tips. We're going to come back and we're going to talk about all the other companies you mentioned because they all run a parallel. There's a fundamental baseline thing happening here. And it involves a displacement of the American technology in favor of the Chinese technology and the Chinese companies. And I think if the more we explore these companies, the more we're going to confirm that proposition. So give us a minute, Russell. Send your tip and we'll be right back in one minute with Russell Liu. This is Think Tech Hawaii raising public awareness. I just walked by and I said, what's happening, guys? They told me they were making music. Hi, I'm Pete McGinnis-Mark and every Monday at one o'clock, I present Think Tech Hawaii's research in Manoa, where we bring together researchers from across the campus to describe a whole series of scientifically interesting topics of interest both to Hawaii and around the world. So hopefully you can join me one o'clock Monday afternoon for Think Tech Hawaii's research in Manoa. Okay, we're back. We're more excited than ever in talking with Russell Liu who's a Hawaii lawyer who practices and teaches in a law school in Beijing in China and he's our observer, our man on the street there, and he's got some fantastic stories and sea changes to describe to us and the sea chains we're talking about today is these innovation companies that have sprung up in recent years and done remarkable things to change the lives of all the people in China in every city. And so the message that I'm getting, Russell, is that these Chinese companies have not just vaccinated, they've gone beyond American companies and the people have not just warmed up to it, they live by it, and it has changed their society remarkably. You can put down fast trains and roads that connect the whole country, but the impact of these technology companies is extraordinary. And so I want to explore some of the others with you. We've talked briefly about Uber, an Uber in China that goes beyond. I'd like to talk to you about WeChat. You mentioned that earlier. That's a kind of it's a kind of social it's a social media kind of program, but it goes way beyond that, isn't it? You were talking about going to a restaurant and using WeChat to order your food and to pay for your food without even standing up. How does that work? It's very simple. I could be in the second floor. I was having lunch last week with a fellow American. We're sitting on the second floor of a large restaurant. We order a dish and we're done. What they do is the waiter or waitress has keyed in the cost of that into our little scanning code for that table and we simply get our phone and I turn my WeChat and I'll scan it, the code and the demot will come on my smartphone and I'll say yes or no pay and I hit pay and then I decide with my friend we should be splitting the cost. So I get my smartphone and I will say I'll send this. How much is it? Let's divide it and I send that amount when I pay for my cost to my friend. The transaction is done without leaving the table. It's without going downstairs to pay the cashier. It's without using the cashier to carry on the services. So all these things affect everyday living in China. Yeah, and now what about the social media aspect of that? WeChat is also sort of a social media program, isn't it? Doesn't it do the same kinds of things that American social media companies do? Yes, well WeChat, through WeChat I'm able to actually do a video call with somebody. I'm in the US and I'm calling my Chinese friend. I don't use the log distance company. When I'm on the internet I press talk and it will ring the other person in China and they will hit accept or no, decline message and we can start talking over the phone. I do a lot of calls like that so many Americans who come to China now all have WeChat you can use WeChat in the US from the US to use it to another. So that's why the applicability of WeChat, some of these social platforms are gaining global attention because you can use WeChat in the US and you don't have to use it only in China. So it's a great way to also, I teach a law class I want to send my PowerPoint to the students. I will put the PowerPoint on my smartphone and I send it to WeChat and that is faster than using email. It's faster than using email. How would you compare? It's the responses. How would you compare WeChat with something like Twitter or Facebook? Does it fill that gap too? With Facebook I have to log onto a computer I basically have to open a computer. That's the biggest deterrent. I don't want to carry my computer. I want to be able to be connected wherever I go. So WeChat uses a smartphone. I can connect it wherever I'm going. It's quite remarkable what's happening. Let's talk about Alibaba for a minute. That's the Jack Ma company. Huge company in only a few years. It's displaced to any kind of Amazon type company in China and they're selling everything and delivering it everywhere. Can you talk about how big and liquid is that is? Can you talk about whether Amazon or any other competitor might exist in China to do the same thing that Alibaba's doing? I think there are different hurdles here because number one I think the American companies don't understand culture. They don't understand how things are done here in China. I think to become a mega giant, if I was Jeff Bezos of Amazon I would set up a logistics center maybe in Honolulu that would work with Alibaba, the joint venture, and the U.S. products. You can buy Amazon things out of China and when you click on Amazon it'll say ship to China. Yes, we ship to China. My idea is listen to the governor. Now the governor, I hope you're listening is to open up special zones in Hawaii in Honolulu to facilitate logistics. And being able to work with the Chinese companies and give them a favorable tax rate, let them come in here and make an investment. And you will create all of a sudden Honolulu a super value place, up to value change. Well, Jeff Bezos was here a few weeks ago. That's what I understand. So maybe this is in the cards in some way. Certainly Hawaii would be a great place for his mega center especially if he's thinking of being a commercial or merchandise bridge with Asia going both ways. Hawaii could play a great role in that way. So Russell how does the Alibaba compare in terms of its involvement in the daily life of a Chinese person with Amazon? Amazon's getting to be the source of all retail products really for a lot of people I know and for my family. We get so much from Amazon. Is that the way what happens with Alibaba also? Well, I think Alibaba is more than just what Amazon is. I understand you can buy food, you can buy things like that. I think Amazon's heading that direction of being able to deliver things like that. But we're seeing a little copying of the Chinese platform. I think it's more pervasive in everyday lives. But the key thing really is to technology J, accessibility through the smartphone innovation and the internet. So you need several partners. You need a government to have a policy of innovation. You need technology companies like Alibaba. Okay, it's tied into the distribution chain and the companies. Then you need people who buy into this thing, buy into technology. People who go through their smartphones. So you need all of this together. What I wanted to talk about was a people fact which we haven't talked about. Yes. Well, and that would take me to the granddaddy of them all, the empire so to speak of Google. Google who can do so much and does do so much to change our world on the internet. But Google, I don't know if Google exists in China, but you certainly have Baidu and the American people and people I know have made a lot of money investing in Baidu stock because it's growing so fast. So how does Baidu in China compare with Google either in China or the US? Yes, Baidu is the big surgeon here in China. And I think through Baidu it has been able to be an effective way for many Chinese to connect to the internet. I think one of the things that I'm cognizant of is that it's a different culture here. It's a different regulations here. So I think Google, for it to compete there are certain regulatory requirements here. Same way if a Chinese company went to the US, they would have to follow US regulatory requirements. And I think that we are seeing more American companies having to adapt and change so that they could be in this market here. It is a huge market and it's getting bigger and bigger. And again it's changing the way people do things. I think the internet is a common thing. Everybody has to have internet here. It's amazing because through this acknowledge and innovation it holds up the economy. People are spending money every minute. Every second they're on their smartphone buying things. It's like Baidu are great help. It helps that out. I'm sure. And on top of that the regular Google search function for anything and everything you ever wanted to know about anything. But let me ask you one more question. We're almost out of time Russell and that is this. So China has some very good software and it's developing the software. It's kind of in development cycle on all these products we've talked about is better and better. And people feedback and they use it and so you have this huge market with great, the stakes are very high to try to improve it and improve it again and again and again so that it's pervasive. So the question is and you mentioned by the way that WeChat known as WeChat in the U.S. is now in the U.S. And I think you talked about other companies that are in the U.S. Chinese companies that have started doing business in the U.S. These very companies we're talking about. Companies that emulated American companies are now back in America competing with the same American companies they emulated and surpassed. What about other parts of the world? Do you see the possibility of this intellectual property of these tech companies, information tech companies being exported, setting up shop getting some traction in Southeast Asia, Australia, New Zealand, India. Is that likely to happen or is it going to stay in China? I'm sorry I might have missed the last part of your question but I think the gist of it is that I've seen the Chinese companies have gone abroad already. For example in Central South America you fly into the airport. I see banners of Huawei they're all over China. Chinese companies are there. One of the driving forces is that China has come up with this One Belt One Road program. It is happening. People from different parts of the world are coming here to figure the business angle of how they're going to play the game and in doing so they've taken many of the Chinese things products and so forth back to their home country. So I think that the key common thing in the culture is economics. If there's a way for people to make money they will find a way and they will adapt that technology. Especially considering around the world most countries are not as developed as the US. So therefore in developing countries basically China they saw how it has risen based on the use of technology or even poor people have the technology they all have cell phones. So they see that the Chinese have the application for it not the Americans the Chinese so they're going to start to slowly shift over using the Chinese platforms and so that's why Chinese products and technology are all going to be pervasive. So that's where I see the US kind of losing the edge because we make products for only a US market we make products to fit the old platforms AT&T the T-Mobile we don't use it to fit how to merge these things in the smart phone. Maybe Apple is the only one that's kind of ahead but I think everyone else in the US is on the old traditional based models. Those models are too expensive to take to a third world country. Things are happening this is a tremendous sea change and if we haven't mentioned it specifically and you started out this program with the same thought is that yes you can put Mandarin on the cell phone but you can also put English on the cell phone and I can be here in Honolulu and download WeChat in English. So all these programs we've talked about can be written in English. They are being written in English. They are exportable not only this country but everywhere so we've really touched on a very important subject Russell. Thank you so much for joining us and helping us understand we want to come back and discuss more of these companies more of this technology. It's a moving target and you can help us with that. Russell Lu a Hawaii attorney practicing and teaching in Beijing. Thank you so much Russell.