Opinion: Chinese firms are gearing up for new legal world order

Since China’s outbound investment, or ’go-global’ campaign, started 10 years ago we have witnessed Chinese enterprises flexing their muscles internationally.

Jack Yu
Jack Yu

This trend is going to continue, especially in the post-global economic crisis era.

China’s legal sector has developed ­significantly over the past 30 years. There are now more than 14,000 firms and 150,000 practising lawyers. In 1979 the figures were 79 and 212 respectively. ­Chinese firms may still have some way to go in terms of developing as modern ­business practices, but there are three ­reasons why I believe Chinese firms will be competing globally with Western rivals in 10 years’ time.

First, the Chinese are acutely aware that the biggest assets that firms have are its lawyers, but the legal education system has struggled to ­produce the calibre and practical skills demanded by the market. Some ­leading law schools have started to work with practitioners to introduce skills-based subjects to their curricula. This is groundbreaking in a system full of ­professors with little practice experience.

To some extent legal education has to be reformed and there is huge pressure to get this right (law is one of the most ­difficult degrees from which to find ­graduate ­employment). If the next ­generation sees a large number of skilled and qualified lawyers in a saturated ­market, they will look ­outside China.

In fact, this is already ­happening in the UK, with ­hundreds of Chinese students ­pursuing their LLMs or GDLs.

While we assess the impact of the Legal Services Act, do the Chinese think about regulatory innovations? The legal ­profession in China has dual regulators: the Ministry of Justice (MoJ) serves as the administrative supervisor and the China Lawyers’ Association is the self-regulator – and the real power is with the former. The new Lawyers’ Law has permitted LLPs and unleashed a certain amount of energy.

Second is the empowerment of the lawyers’ associations by the MoJ. ­Decision-makers realise they have to enable the profession to shape its own future. This will bring about more ­innovations, capital and resources based on which firms will think bolder and act faster. The Chinese government may invest in firms, just like it does in banks and companies, and be active in providing capital and ­preferential policies to help its law firms compete internationally.

Third, we are proud that the English ­language and our legal system stand us in a position that is second to none. It ­contributes to the dominance of English law in cross-border transactions and to some degree the formation of our global firms. Would not the Chinese want to set their own legal services standards and influence other jurisdictions?

Admittedly, modern mediation ­standards trace back to ancient Chinese social principles. More recently the ­Chinese government has been reform-minded by promoting the ­renminbi as a settlement ­currency for trade, while its ­central banker called for a new global ­currency run by the ­International Monetary Fund to replace the US ­dollar. My ­evidence is anecdotal on the law front, but we have seen the ­Chinese scale of ­ambitions in ­restructuring world ­institutions and ­challenging the order and standards set by the West. There are ­indications of how economic (and ­political) power is going to shift from the West to East.

I suggest our firms take notice of these movements and start thinking about how best to deal with the China phenomenon now. To help in this matter the China Law ­Society is hosting a trade mission to the UK from 10-plus ambitious Chinese firms from Beijing, Shanghai and several second-tier markets from 22-24 March 2010.