2019 marks the arrival of the Year of Pig, which is said to bring luck and prosperity to those born into it. Looking at The Legal 500’s latest China rankings, the previous 12 months have certain been good to many firms – 130, in fact – that made it into our expanded 2019 guide. The market is set for another buoyant year, but before we begin the next cycle of research it is worth looking back on what we discovered last time we delved into China’s legal sector.
Last year’s research highlighted some notable developments, such as Anglo-Australian firm Ashurst’s launch of a formal tie-up with Chinese firm Guantao Law Firm, through a joint operation office in the Shanghai Free Trade Zone; consequently Ashurst became the fourth global player to gain Chinese law access through the 2014 scheme. Following hot on Ashurst’s heels, Linklaters became the fifth international firm to launch a joint operation, thanks to its cooperation with Zhao Sheng Law Firm. Meanwhile, Mayer Brown’s association with PRC firm Jingtian & Gongcheng ended in 2018, with the two firms entering into a global cooperation agreement.
In other news, Beijing continues to welcome new entrants. Palo Alto-based Cooley is celebrating the one year anniversary of its Beijing office; the firm’s second office in China – after its 2011 Shanghai launch – followed the hiring of investment funds lawyer Xun Zeng from Ropes & Gray. Meanwhile, UK firm Stephenson Harwood also bulked up its China practice with the acquisition of Atlanta-based Troutman Sanders’ Beijing office, which in January 2018 also announced the closure of its Hong Kong, Beijing, and Shanghai outposts.
High-profile partner moves from international law firms to ever-growing domestic China practices continue to gather momentum; recent examples include Linklaters’ former managing partner for China, Jian Fang, exiting for Fangda Partners last January; the former Beijing managing partner of Clyde & Co, Patrick Zheng, joined Llinks Law Offices last March; and cross-border dispute resolution specialist Vicky Zhao joining AnJie Law Firm from Freshfields Bruckhaus Deringer. Meanwhile, other lawyers of note are moving in-house; Simpson Thacher & Bartlett’s former Beijing partner Shaolin Luo joined private equity client YunFeng Capital as general counsel in June 2018.
Digging into the detail of the latest China rankings we see King & Wood Mallesons (KWM) is positioned as the most ranked firm in China, obtaining Tier 1 rankings in 15 practice areas. Zhong Lun Law Firm closely follows with 13 top tier rankings. Both firms were also ranked in all 18 practice areas of the China guide. Other PRC firms which achieved the most Tier 1 rankings include Fangda Partners (11), Junhe (six), and Hankun Law Offices (four).
Elsewhere in the charts, Global Law Office is ranked in 17 practice areas, including three top tier rankings, while Dentons (13), Fangda Partners (13), Han Kun Law Offices (13), Guantao Law Firm (ten), Llinks Law Offices (ten), and Allbright Law Offices (nine), DaHui Lawyers (nine), and DeHeng Law offices (nine) also placed well in 2019.
The growth of Han Kun Law Offices, Dahui Lawyers, and AnJie Law Firm is also worthy of specific comment. Han Kun Law Offices was ranked in just one practice area in 2013, yet this year it places alongside Fangda Partners and Dentons China with a total of 13 rankings. Elsewhere, Dahui Lawyers continues its expansion and recently welcomed the arrival of corporate and capital markets duo Julia Dai and Xikang Wang from Latham & Watkins and Goldman Sachs respectively, as well as antitrust specialist Jie Tong from Allen & Overy. The firm’s hiring strategy is clearly paying off; in 2017 it was only ranked in two practice areas, yet 2019 sees it recognised in nine. And while AnJie Law Firm only entered the ranking in 2015, it is now ranked across six practice areas.
What’s keeping law firms busy?
With China’s growth at an expected 6.7% in the second quarter of 2018, its slowest pace since 2016, the world’s second-largest economy has slowed down amid a fiercely spiralling trade war. Furthermore, China’s National Development and Reform Commission’s tightened curbs on capital outflows and increased scrutiny on foreign acquisitions have led to a reduction in global outbound investment. That said, there are a number of very hot sectors in China, such as TMT, education, healthcare, and financial services.
There has also been an increasing interest from Chinese companies seeking public funding and international firms eyeing entry to China following Hong Kong’s recent change in its listing rules for biotech firms. The effect of China US trade war is still deeply felt with a reported 70% drop in 2018 and it will likely impact the amount of Chinese investment into the US in 2019. This uncertainty drives Chinese investors away from investing in the country, who do not want to be caught up in a review process with the Committee on Foreign Investment in the US (CFIUS).
Consequently, Chinese institutional investors are either self-censoring or not taking any risks of making acquisitions in the US, instead turning their interests elsewhere, such as Latin America and Europe. This, however, means that the loss of investment funds from China in the start-up space, which offers access to the China market in return for investment.
Another notable trend in 2018 was the government’s continued push for the mixed ownership reform, which the Chinese government take the lead in choosing a number of centrally and locally-administrated SOEs from a broad range of industries to enter the ongoing mixed ownership reform.
Jieming Weng, vice-chairman of the State-owned Asset Supervision and Administration Commission of the State Council (SASAC), commented, ‘mixed ownership reform should be a two-way street. The government will not only encourage non-public capital to participate in SOE reform, but also support the development of private business together with SOE resources’.
However, SOEs will still retain a strong role under President Xi, sectors that are largely monopolised by SOEs at present are likely to remain so, although some opportunities may emerge for private domestic and foreign investors. The government’s control of sectors such as telecommunications and electricity generation would not be hindered if they were opened to external investors.
Despite being a new practice area for 2019, fintech received a number submissions from both foreign and PRC firms, indicating the demand and the fast developing nature of China’s fintech market. The nation’s internet giants, Baidu, Alibaba, and Tencent are all either building or investing in blockchain technology; Alibaba has partnered with the city of Changzhou to launch China’s first application of blockchain tech in the medical sector, while Tencent hass partnered with China Federation of Logistics & Purchasing to develop an industry application based on the Tencent blockchain TrustSQL.
The firms which were recognised in this brand new category were ranked against their expertise in advising the big banks on financial regulatory matters, as long as the matters had a significant technological
component; assisting innovative fintech start-ups through securing FCA regulatory approval, obtaining seed financing, handling investment rounds, and undertaking or being the target of potential corporate
transactions; as well as advising blue-chip corporates on developing, implementing, or rolling out financial technology.
The most successful foreign firms in our rankings include Baker McKenzie, with 15 practices ranked and followed closely by Hogan Lovells (14), DLA Piper (13), Allen & Overy (12), and Clifford Chance (nine). Baker McKenzie, Clifford Chance and Linklaters achieved five top tier practice area rankings – the most of all international firms – followed by Allen & Overy with four.
Looking back over the last five years, Baker McKenzie has consistently topped the international firm charts with the most China rankings. Hogan Lovells, DLA Piper, and Clifford Chance have also been continuously recommended across a number of practice areas during that same period. The most improved firm, however, is Morrison & Foerster, with nine practice areas now ranked compared to four in 2018.
Turning to individual rankings, KWM has 25 partners ranked in our exclusive leading individuals list, retaining its place as the firm with the most leading individuals highlighted over the past five years. KWM can’t rest on its laurels, however, as Zhong Lun Law Firm aren’t far behind and has seen a steady growth in the number of leading individuals ranked over the past five years (from 13 in 2016 to 23 in 2019). Baker McKenzie (8) has the most leading individuals among foreign firms, followed by DLA Piper (seven), Allen & Overy (six), and Clifford Chance (six).
Looking at firms’ succession planning in China, Ashurst, Clifford Chance, and Hogan Lovells are the firms with the largest number of next generation lawyer recommendations, achieving four individual rankings each across 16 practice areas. By contrast, Zhong Lun Law Firm has the most next generation lawyer recommendations, with 16 senior associates and of counsel ranked across 18 practice areas. Elsewhere, KWM has ten next gen rankings, while JunHe and Han Kun Law Offices have six each.
Congratulations to all firms and individuals ranked and recommended in 2019 and a massive thank you to all who took part in the research process. If you have any comments on The Legal 500’s 2019 Asia Pacific guide, or suggestions for future guides, then please contact me at [email protected].