Of all the trends in the global legal market over the past two to three years, among the starkest has been the stampede of international firms into China. The region has emerged as the key battleground for many of the world’s leading international law firms. Consequently, the ‘Chinese question’ has rocketed up many a firm’s agenda. More specifically, firms are looking at mainland China, meaning Shanghai and Beijing. The cities have begun to equal Hong Kong in terms of importance in many international firms’ strategies. A series of office launches and partner hires confirm the trend. In September 2006 Fried Frank Harris Shriver & Jacobson raided Simmons & Simmons’ Hong Kong and Shanghai offices for five partners, including its China regional managing partner Huen Wong and head of the China corporate group Stephen Mok, to open its first office.

On 13 October The Lawyer reported that Mayer Brown Rowe & Maw was to open a Hong Kong office, finally getting the full Chinese legal offering that it has conspicuously lacked. Earlier in the year Orrick Herrington & Sutcliffe won its long-running bid to obtain operating licences for the mainland China offices it acquired from defunct firm Coudert Brothers.

GROWTH AND OPPORTUNITY

It is, of course, the explosion in China-related work that is enticing an ever-extending list of firms to the country. The past 12 months in particular have seen an explosion in the number of multibillion-dollar China-originated deals. The record float of the Industrial and Commercial Bank of China, on which Freshfields Bruckhaus Deringer and Herbert Smith scooped lead roles, the $11bn (£5.84bn) Bank of China IPO and the China Construction Bank float in November 2006 are indicators of the health and confidence of the market. As Linklaters’ China managing partner for the past three years, Simon Davies (finance head Giles White replaces Davies at the end of 2006) says: “Many of the major investment banks are looking to be more active in China.” The internationalisation of a growing number of Chinese companies is ramping up the M&A, private equity and capital-raising opportunities. Foreign direct investment continues apace, while an increasingly liberal economy coupled with a projected growth rate of around 10 per cent means instructions for lawyers working in China have never been higher.

The fortunes of the leading global players are reflected in the fortunes of the world’s largest firm, Clifford Chance. Its Asia operations turned over £70.4m during 2006-06, a 10 per cent increase on the year before, powered largely by a whopping 25 per cent growth in China.

A succession of UK firms, including Clyde & Co, DLA Piper, Norton Rose and Pinsent Masons , have opened, or announced their intentions to open, offices in mainland China in the past year. Exclusive research by The Lawyer confirmed that it is UK firms that are so far being most successful in terms of increasing their representation in China. Although the largest foreign firm locally remains Baker & McKenzie with 211 lawyers, eight out of the top 10 largest foreign firms in China are headquartered in the UK.

Bakers’ track record in the region, by way of example, confirms the benefits of having a significant presence on the ground. During the past few years the firm has completed more than 100 IPOs in Hong Kong and a string of major offerings, including those of China Life, PetroChina and Air China.

Bakers Beijing partner Jackie Lo says: “The deal list illustrates our firm’s decision to build a strong practice in China was the correct one. Clients want their counsel to be close to them.” It is a similar rationale followed by Sullivan & Cromwell, which is currently examining the prospects of opening its third Chinese office in Shanghai (as first reported by The Lawyer, 16 October 2006). As Sullivan China managing partner Wei Chun says: “For law firms, the concentration of resource and the efficiency of using those resources is key. It’s hard for us to just spread these [resources] around unless there’s a real strategic need. Thinking ahead, we’re starting to look at Shanghai as a possibility.”

Good contacts help too when getting into China. Take regulatory specialist WilmerHale. The firm has no immediate plans for a Hong Kong or Shanghai launch, but is keen to grow its technology, litigation and IP presence in Beijing. And it appears to have itself a good platform.

WilmerHale partner Charlene Barshefsky was the architect and chief negotiator on China’s entry into the World Trade Organisation. As the firm’s co-managing partner Bill Lee (who is himself of Chinese origin) explains: “The firm’s China practice has been built around Charlene.”

Likewise, many of Linklaters’ senior partners have a history of working in Asia, which not only means the firm has good contacts in the region, but that the Asia practice has maintained consistently high levels of support in the business.

High-profile partners such as David Cheyne, Nick Eastwell, Jeremy Parr and Giles White have all spent much of their working lives in Asia and remain cheerleaders for the region.

US INTEREST

Several firms from China’s biggest trade partner, the US, have been eyeing China, if anything, even more than those from the UK. The mergers of Kirkpatrick & Lockhart Nicholson Graham and Preston Gates & Ellis and Orrick Herrrington & Sutcliffe and Dewey Ballantine, assuming they succeed, are both likely to enhance significantly the merged firms’ profiles in China.

Cleary Gottlieb Steen & Hamilton launched an office in Beijing early in 2006, although it shut the doors on its underperforming Tokyo office for the last time the following month. Other US firms including Kirkland & Ellis, Perkins Coie and Simpson Thacher & Bartlett all opened offices or ramped up their presences in the jurisdiction.

And it is not only the corporate and finance heavy hitters that are weighing up their China options. US litigation boutique Shook Hardy & Bacon has had an informal alliance with China’s largest law firm King & Wood for a year. The firm’s chairman John Murphy believes it is “only a matter of time” before US-style litigation takes off in China. Consequently, his firm has been busy positioning itself to capitalise on these nascent markets when they come to fruition.

But the movement has not only been one way in Asia. Freshfields shut down in Singapore during the year in an effort to focus its Asia strategy on mainland China and Hong Kong. And in its typically maverick manner, Slaughter and May, which has a base in Hong Kong, has cannily cultivated strong relationships with elite China practices Haiwen, Jun He and King & Wood.

Of the US firms that dominate the global profit tables, virtually none have any significant presence on the ground in China, while Cravath Swaine & Moore closed its office in Hong Kong four years ago. Instead, the dominant US names in China are the national players that have business models similar to the UK outfits’ – among them Bakers, Jones Day and Orrick to name but three. No wonder Dewey was interested in talking to Orrick. No wonder Kirkpatrick is in merger discussions with Preston Gates, which already has some 30 lawyers in China. No wonder Fried Frank took those five partners out of Simmons. As Freshfields partner and former chief executive Hugh Crisp said: “China’s where the biggest demand for legal work is. Growth in our China practice has been substantial thanks to the booming IPO market and the surge in M&A activity.”

And as Linklaters’ Davies puts it: “I’m not aware of anyone retrenching in China.”