Linklaters is in talks with Chinese law firm Zhao Sheng to enter into a "best friends" relationship in the next two or three months, with an eye to eventually launching a joint operation in the Shanghai Free Trade Zone (FTZ). 

As of now, no Magic Circle firm has a joint venture in the FTZ. Baker McKenzie was the first foreign law firm allowed to establish a joint operation in the Shanghai FTZ with a Chinese counterpart, partnering with FenXun Partners in 2015. Clyde & Co. is also in a joint venture in China, but it is with Chongqing-headquartered Westlink Partnership.

 “Taking account of recent developments in the market, we have begun detailed discussions with an existing PRC law firm to enter into a ‘best friends’ relationship with a view at some point in the future to enter into a Shanghai Free Trade Zone joint operation,” said Chris Holt, Chief Operating Officer of Linklaters China.

“Once the detailed discussions have concluded, we will officially launch the ‘best friends’ relationship. We hope to do this in the next two to three months,” he added.

The Shanghai FTZ was approved by China’s Ministry of Justice in January 2014, allowing foreign law firms with representative offices in China to set up joint operations with Chinese firms within the FTZ. However, the legal status, official name and finances of both sides must remain independent during the joint operation.

Linklaters has offices in Beijing and Shanghai. Banking and projects partner Xiaohui Ji and competition partner Fay Zhou are in the Chinese capital, and corporate partner Jian Fang is in Shanghai. It is expected the three partners will set up the new independent firm in the Shanghai FTZ.

“Market shifts have indicated that outbound work and high-end domestic transactions will become ever more important for our business,” explained Holt. “We believe that being able to offer integrated Chinese and international law advice will help us to protect our competitive advantage both in China and globally.”