Revealed: Top 30 Chinese firm profits reached £1.4bn in 2016

The combined net profits of the top 30 highest-grossing Chinese law firms reached £1.4bn (RMB12.66bn) last year, The Lawyer China Top 30 2017 report reveals.

In an industry first, this year’s The Lawyer China Top 30 report – which will be available exclusively to purchase online on Monday 2 October – is able to shed rare light on the top 30 Chinese firms’ profitability. In the past three years, the report’s analytics were largely based on firm’s headcount and revenue figures.

Against an even richer set of data and more quantifiable results, the data shows the so-called red circle, a group of eight prestigious firms, outperform the rest of the Top 30.

The Lawyer first coined the “red circle” term in its first China Top 30 report in 2014. The group consists of Commerce & Finance, Fangda Partners, Global Law Offices, Haiwen & Partners, Jingtian & Gongcheng, JunHe, King & Wood Mallesons (China), JunHe and Zhong Lun.

Since then, it has gained wide popularity within the Chinese legal community as well as law graduates when it comes to recruitment. The “red circle” refers to a group of eight Chinese law firms that are perceived as prestigious or high-quality, similar to the magic circle firms in the UK and white-shoe firms in the US.

Although their sizes vary largely, as revenue range from RMB2.48bn to RMB280m and total number of lawyers range from 1,402 lawyers to 120 lawyers, this group has much higher average revenue per lawyer (RPL), revenue per equity partner (RPP) and profit per equity partner (PEP) compared to their top 30 rivals (see table below).

By RPL, the red circle firms’ average stood at RMB2.33m, more than double the average of the rest 22 firms in the top 30. By PEP, the red circle scored an average of RMB6.5m last year, also doubling the other 22 firms’ average figure.

However, two firms outside of the conventional red circle group, Beijing-based Han Kun and Shanghai-based LLinks, stand out from the crowd having exceeded the red circle threshold across the RPL, RPP and PEP metrics.

As a matter of fact, Han Kun has claimed the top spot as the most profitable firm in China, with an estimated profit per equity partner of RMB9.6m (£1.07m). This would put the firm in the 10th place by PEP in the UK. According to 2017 The Lawyer UK 200 research, UK firm Travers Smith posted a PEP of £970,000 in 2016/17 while Michcon de Reya’s PEP was £1.1m. They were ranked 10th and 9th respectively by PEP among the UK’s 200 largest firms. Han Kun is also ranked at the top by RPP, as each partner generated an average of 12.86m revenue in 2016.

Fangda, one of the conventional red circle firm, came second by PEP, which was estimated at RMB8.5m (£946,000). It is followed by Global Law Offices and Llinks. JunHe came fifth. Zhong Lun, Commerce & Finance, KWM, Haiwen & Partners and Jingtian & Gongcheng make up the rest of the top 10 firms with the highest PEP.

Red circle vs rest of top 30

Source: The Lawyer China Top 30 2017