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With foreign direct investment hitting a record low in the April-June quarter and cross-border trade slowing, some international law firms have been forced to lay off staff or withdraw from China this year.
As foreign competitors cut back on their operations in China, domestic law firms are gaining ground in the domestic market and are even expanding beyond the mainland. Smaller clients such as private enterprises, often financially constrained, are also actively seeking out Chinese law firms, which offer significantly lower fees than their international counterparts.
“In the current global environment, we find that Chinese clients feel more comfortable working with people who speak the same language,” said Matthew Kim, who is leading the expansion strategy of Beijing-based Chinese law firm Jingsh, which has expanded to Seoul, Tokyo and North Korea. Another plus for Chinese law firms is that geopolitical tensions have also made Chinese clients more likely to work with domestic law firms that have a similar mindset, in addition to speaking the same language.
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| Jingsh Law Firm announced its decision to establish a branch in Pyongyang. Photo: BNN BREAKING |
Demand for legal services has naturally followed capital flows to and from the mainland. In the 2000s, foreign law firms, mostly Western, took advantage of those opportunities to serve clients investing in China. But as the direction of capital flows changed and China’s overseas investment increased in tandem with the government’s Belt and Road infrastructure program, Chinese law firms followed the money.
Beijing-based Yingke Law Firm opened a branch in Vietnam last month, while Allbright set up offices in Tokyo in March and Singapore in May 2022. Hong Kong-based Zhong Lun Law Firm is also set to set up an office in Singapore... Data from China's Ministry of Justice shows that the number of overseas representative offices of Chinese companies has increased from 122 in 2018 to 180 in 2022. In 2017, there were 207 Chinese-trained lawyers working in Hong Kong, while mainland Chinese law firms accounted for 30% of law firms in the city. Those numbers have since increased to 317 and 38%, respectively.
China’s global profile has grown over the past decade, a trend that reflects the maturing of China’s legal industry, with a growing pool of legal professionals. Hiring experts from Western partners has allowed Chinese law firms to rapidly expand their legal services and legal knowledge. Six of the world’s top 10 law firms by headcount are Chinese, according to Law.com’s 2022 Global 200 ranking. It is also a sign of the headwinds facing international rivals that have traditionally dominated Asia.
Professor Sida Liu, co-author with Anson Au, wrote “A Gateway to Global China: Hong Kong and the Future of Chinese Law Firms”, predicting that in the next 3-5 years, we will see more Chinese firms expanding within Asia than globally.
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