Managing Partner Roundtable: Greater Bay Area
It has been almost a year since China launched the Great Bay Area Initiative. With the setting up of Shenzhen as a pilot city and innovation as well as the establishment of digital technology goals, lawyers appear to have a better idea about how the area will evolve. In this roundtable, leaders of law firms in the GBA talk about their overall strategy, and also the types of services they’re providing for local clients.
ALB: How many branches do you currently have in the GBA? How do they cooperate?
DIXON ZHANG, partner at Fangda Partners: Fangda Partners currently has three offices in Hong Kong, Shenzhen and Guangzhou.
There are currently 21 partners at our Hong Kong office, while 10 partners are based in Shenzhen, and three are based in the relatively new Guangzhou office.
Established six years ago, Fangda’s Hong Kong branch specialises in local dispute resolution and the dispute resolution of BRI projects. More importantly, it also advises on capital market transactions and bond issuance.
These three offices are dubbed the “GBA offices” of Fangda and we have appointed a managing partner, Colin Law, to oversee coordination between offices.
SU DONGHAI, senior partner and managing partner at ETR Law Firm: We have quite an extensive presence in the GBA. ETR’s headquarters are in Guangzhou, and we also have offices in Shenzhen, Zhuhai, Zhongshan, Dongguan and Foshan.
We’ve also built good relationships with peers and local governments in Jiangmen, Huizhou and Zhaoqing. Jiangmen is the hometown of many overseas Chinese who are likely to make more investment in mainland China as the market opens up; it is necessary to consider that when doing business planning for the GBA.
LIU WEN, partner at Commerce & Finance Law Offices: Commerce & Finance’s Shenzhen branch has grown rapidly since its establishment in 2017. We started with 30 employees and are now at 50, but we hope to expand that to 100 in the next year or two. The Shenzhen office focuses on the H-share and A-share markets, as well as dispute resolution and compliance. In 2018, we opened a branch in Hong Kong with a focus on traditional IPO and post-listing compliance issues.
We seek synergy between Commerce & Finance’s Hong Kong office and all the other offices on the Mainland, not just Shenzhen. Although the firm is mulling over the establishment of more branches in the GBA, it has yet to decide on a sound strategic layout.
LANG YUANPENG, management committee partner at Jingtian & Gongcheng: Jingtian & Gongcheng has an office in Shenzhen, and an independent branch in Hong Kong. We are also in the middle of preparing for the opening of the Guangzhou branch which is scheduled at the end of December. It is expected that Jingtian & Gongcheng will have a team of 100 in the GBA by then. The firm has brought in partners specialised in maritime affairs, construction engineering and dispute resolution as an extension of the original business focuses of finance, securities, corporate and M&A.
ALB: It has been nearly a year since the Outline Development Plan for the GBA was released. What is your overall strategy for the GBA?
ZHANG: Although the plan outlined the positioning of all GBA cities, the implementation of the plan in mainland cities will be more effective due to the “one country, two systems” policy. The opportunities for law firms specifically, lie in the integration of different legal systems in the area.
There is also a trend of mainland law firms setting up practices in Hong Kong; they usually start as an alliance and then gradually turn into a sole proprietorship. This works both ways: Hong Kong law firms can also forge alliances with mainland firms in the GBA.
SU: The outline plan has triggered fundamental changes in the legal service market, which are firstly reflected in the closer links between legal services and legal institutions in the three places. Secondly, with more exchanges between the three jurisdictions, there are more issues about the application of law that will drive the strategic adjustment of the legal service institutions in the area. LIU: The GBA entails comprehensive opportunities for the legal services industry. The primary goal of the Greater Bay Area initiative is to establish an economic system supported by innovation and to promote the coordinated development of the three jurisdictions. In terms of innovation, there will be accompanying opportunities in fields such as intellectual property rights, corporate, labour and employment. In terms of coordinated development, the flow of people, capital and goods in the region will bring new opportunities in foreign exchange, capital markets, mergers and acquisitions, as well as private equity.
Commerce & Finance is particularly focused on compliance risks mitigation for companies like ZTE and Huawei; and is taking more initiative in catering to clients; and growing its arbitration business.
LANG: As a strategy at the national level, the GBA initiative is of great significance and great influence. On the one hand, it promotes the integration and redistribution of the local economic belt, as well as the investment and construction of infrastructure; on the other hand, it will attract outstanding talents from all over the country or even the world to the GBA. This brings both opportunities and challenges to the legal services market.
Before the outline plan was released, Jingtian & Gongcheng had recognised the region and established our Hong Kong branch while actively building offices in Guangzhou and Shenzhen to ensure that the legal services capabilities are balanced on both sides. We also recruited many partners who specialise in areas such as finance, securities, corporate, M&A, maritime affairs, construction, dispute resolution, the Belt and Road initiative (BRI) and so on.
ALB: How has your business volume and service type changed in the GBA? Which legal services are most in-demand in the GBA?
ZHANG: There is an increasing demand for intellectual property rights related services, especially patent litigation, in Shenzhen as it’s home to many major high-end manufacturing and high-tech enterprises against the backdrop of the trade dispute between China and the US. Insolvency reorganization is also in demand because of domestic deleveraging and changes in the economic environment. Also, under the BRI, some domestic enterprises have started up their foreign investment businesses. However, they are mainly state-owned enterprises, private enterprises are not that active in overseas investment. SU: We focus on high-tech enterprises and offering IP-related services. We have recently established a link with the Doctorate Association of Hong Kong, Macao and Taiwan, which is interested in creating a more favourable business environment in the Mainland for high-tech enterprises as well as IP protection. LIU: 2018 was the year of IPOs in Hong Kong’s capital market, so that side of our business experienced high growth last year. There may be a decline in demand in that area, but it will be offset by the growth in our compliance business, which has expanded significantly over the year.
LANG: In the past year, Jingtian & Gongcheng has had much higher business volume in the Greater Bay Area, it is also noticeably higher than in other regions. Generally speaking, clients’ demand for legal advice related to finance, investment, BRI, infrastructure construction and cross-border deals has increased significantly. In addition, with the rapid development of Shenzhen as a ‘capital of technology and innovation’, the demand for legal services in fintech, informatics, Internet, intellectual property rights, corporate compliance and other business areas has also increased significantly.
ALB: Business development in the GBA requires the continuous improvement of lawyers’ capabilities. What type of lawyers do you think are most needed in the GBA? What’s your plan for talent distribution in the region?
ZHANG: We continue to invest in talent specialised in areas such as IP rights, IP litigation, and asset reorganization. Our requirements for talent has also changed: we tend to choose lawyers with a relevant technical background – the best ones are those with a degree in another subject such as telecommunications, new mate-rials or life sciences on top of their law degree. Such versatile talents can better meet market demand and provide legal services for high-end manufacturing or high-tech enterprises in Shenzhen. SU: We have brought in lawyers who are familiar with Hong Kong and Macao affairs as well as foreign affairs. Additionally, we intend to recruit more lawyers who can speak Cantonese. We’re also training existing staff to perform better theoretical research – one of our lawyers has published a book studying the GBA.
LIU: Any lawyer with a good command of English and a solid foundation in law study is desirable. We’ve also discovered that legal talents with a corporate or technical background are especially needed for dealing with compliance issues because the client often judges the quality of your services based on your understanding of their business. So, we recruited a former head of compliance from an established company to build a team to provide legal services to more innovative enterprises.
LANG: We need not only international experts with rich experience in cross-border legal services, but also those who are proficient in fintech, informatics, internet, IP rights, corporate compliance, BRI and other business fields.
ALB: What are the challenges your firm faces in the GBA?
ZHANG: First of all, Mainland lawyers are faced with the need to change their mindset and professional proficiency, as they should place more emphasis on the ability to conduct cross-border transactions and resolve cross-border disputes, and accumulate knowledge and professional experience in both the civil law system and the common law system, to better serve clients in different jurisdictions. The same is also true for Hong Kong lawyers. They may need to get out of their comfort zone and come to work with Mainland colleagues, which involves the mutual adaptation of two cultures.
The recent influx of foreign firms into Shenzhen is a challenge, but it is also a very positive sign. In fact, not only foreign firms but also leading domestic firms have opened branches in Shenzhen in the past two years, which shows that everyone treats Shenzhen as an important market. Shenzhen has China’s first-class manufacturing enterprises that have significant demand for legal services, but many of them feel that the services provided by local law firms are not sufficient.
SU: Law firms should emphasize on professional leadership and in-depth research in areas such as capital market, special types of IP, risk control for hi-tech enterprises, to figure out a different path for growth.
LIU: The biggest challenge is fierce competition with peers. Everyone sees the opportunity, so it will be a test of our management and strategic thinking to earn a place in the market.
Also, there are many TMT enterprises in Shenzhen, which will attract many private equity funds are equipped with their team of lawyers, so we will also be competing with lawyers outside of the GBA.
LANG: There are several challenges: the legal services industry in the GBA is not as internationalised as those of Beijing and Shanghai, so there needs to be further planning and guidance for improvement; due to the lack of high-quality legal education resources, the continuing education and promotion for lawyers is relatively limited; clients need to be further educated about high-quality legal services; the synergy with financial, investment, accounting and IP institutions is relatively weak; and firms will face vicious competition from local firms, which is inevitable in the short term.
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