Opinion | 02-07-18

Chinese private practice legal market update – June 2018

In our latest opinion article, our consultant Nicole Xu highlights the latest recruitment trends we are seeing within law firms in China. 

Exits & entries 
 
The past several years have witnessed the withdrawal of more and more international law firms from the China legal market. Of course, there are still new law firms entering the market but the number is very limited, and their expansion and recruitment are incomparable with the boom years between 2000 and 2008 when firms like O’Melveny & Myers and Paul Hastings hired at an amazing rate.
 
In the current market, international law firms are hiring more at team level rather than hiring individual lawyers. A team hire can help firms to control their headcount and, save on recruitment spend. It can also enhance their brand and market image and reduce the challenges of integrating new individuals into existing teams. One example is Morgan Lewis’s latest merger of Dentons’ capital markets and corporate teams in Shanghai and Beijing. 
 
Another trend is the rise of the international those relatively new Sion-foreign alliance firms. (This includes various alliances such as the SFTZ, CEPA and other types of alliances between foreign and Chinese law firms in China.) The first wave of international law firms choosing to ally with Chinese firms mainly did so for the purposes of widening the scope of service lines offered in China and the wider region. But more recently, alliance firms such as Baker McKenzie-Fen Xun, Clyde–WestLink and Linklaters-Zhaosheng etc, are aiming for much more than that. The advantages these tie ups bring include, stronger, local career paths for Chinese lawyers and the increased ability to become a one-stop shop to clients, against the backdrop of shared  operational costs. As a result we are seeing an increasing demand for recruitment at international law firms and their domestic alliance firms. Candidates like this prospect and the opportunity to work for an international brand but as a Chinese practicing lawyer. In particular, for candidates at partner level, they are able to offer clients more flexible charging rates, which make these alliance firm opportunities especially attractive for them. 
 
However, we will have to wait and see how these firms flourish as part of these alliances and how successful the first wave will be.
 
Diversification & specialisation 
 
Many leading domestic Chinese firms are fast expanding their business. When recruiting senior lawyers - counsels and partners - these firms emphasise synergy of business with existing team and practice groups. For instance, Han Kun is well known for its leading PE/VC business but they recruited anti-trust and IP partners from rival firms such as Fangda and big-ticket M&A partners from KWM in order to enlarge their service bench.
 
International firms are feeling more pressure to enhance their range of practice areas and sector expertise in order to provide clients with more tailored services. For example, from the sector perspective, more international law firms and their partners in China are trying to build their team and reputation in medical and health industry as well as TMT; while from the practice expertise angle, in addition to those traditional area such as M&A, private equity and finance, many international firms are starting to develop strong business and clients relationships within IP, employment, antitrust and international disputes. 
 
Domestic boutiques developing rapidly
 
Boutique Chinese law firms are attracting many star graduates and high quality junior lawyers in recent times. These firms boost a group of outstanding partners who all have excellent practice experience and reputable client bases. They are also investing seriously in office facilities, marketing and associate compensations. However, because of the youth of these small sized firms, their associates and even some junior partners are finding it extremely difficult to balance their workload and the expectations from their supervisors. This regularly drives lawyers at these boutiques to think about leaving. If they leave, many of them look to join the handful of leading domestic Chinese firms and reputable international law firms in search of stronger internal support and resources.
 
On the flip side, recently there has been an increase in the number of senior Chinese lawyers (those having worked 5-8 years in leading domestic/international firms) joining these domestic boutique firms rather than the bigger Red Circle Chinese firms. This is largely down to career progression or an immediate partnership opportunity. 
 
For more information on the current market or to discuss your future career in more detail please contact [email protected]