Leading firms expand at breakneck speed
In 2009 the impetus for Beijing’s law firms to grow has been thrown into overdrive.

Han Kun opened in Shanghai and Shenzhen, Guantao set up an office in Tianjin, Zhongyin in Jinan and Gaopeng moved into Nanjing. JunZeJun formalised its relationship with French ally Kahn & Associes, Guantao opened in Hong Kong, Zhonglun W&D broke into the Middle East and Dacheng launched offices in Israel, India, Singapore and the US. And Longan’s managing partner Xu Jiali has already developed a roadmap for the firm to break into other provinces like Hangzhou, Ningbo, Tianjin and Chengdu, after its setup in Nanjing last year.

Gaopeng’s new office was established via a merger with Jiangsu Hailang. “Being a smaller firm, Hailang needed a larger space and platform to upsize their practice,” says the firm’s managing partner, Wang Lei. “The launch of the new office also recognises the need to establish ourselves in emerging regions.”

Zhongyin’s managing partner, Zhao Cenghai, explains the strategy behind the expansions. “Along with the maturing of the Chinese law and as our corporate clients are rapidly growing themselves through M&A, we must also achieve the mass necessary to meet their expanding needs. Organic growth, through the addition of lawyers or growth by lateral hiring is difficult and insufficient.”

Larger firms King & Wood and Dacheng both opened Shandong offices, making them the first two Beijing firms to have an office in both Jinan and Qingdao. King & Wood also set foot in Hong Kong after completing a merger with Arculli Fong & Ng, becoming the first PRC firm to offer dual capability for its clients.

“The local legal industry is still developing so it’s no surprise to see that many are still focusing their attention on achieving growth. The size of a firm is important as the deals that happen here, both inbound and outbound, are extremely complex, and often require teams of lawyers. Firms that don’t have the critical mass simply cannot compete.” said Zhang Yi, partner at King & Wood. 

Particularly interesting is Dacheng’s regional and international footprint, as the firm seized the title of being China’s largest law firm by headcount, with 835 lawyers spanning over 28 offices (King & Wood came second with 800 and DeHeng Law Offices third with 675). The firm has also established alliances all across the globe: its new branch in Los Angeles was founded through a strategic alliance with Matthews Wilson and Hunter.

After establishing Dacheng Central Chambers (DCC), the result of an alliance with Singapore’s Central Chambers, DCC and Indian firm Vaish Associates Advocates then arranged a ‘best-friends’ agreement, to offer their clients greater access to China-India trade opportunities.

Dacheng also independently allied with Israeli firm Shibolet & Co. “In the past, we focused more on our domestic expansion and now we are moving on to expand overseas. That will be our 2010 strategy,” said Xiao Jinquan, a senior partner at Dacheng. Xiao notes that as domestic expansion plans are almost complete, the firm will now focus on restructuring its global network and resources.

According to him, plans for a New York branch are underway and the firm is now eyeing locations like South Africa, Dubai, Egypt, Vancouver, Washington DC, Toronto and Boston,

Specialty firms gain ground
A range of mid-tier specialty firms have risen to prominence over the past 12 months. Firms like LexField, Tiantong & Partners and Run Ming have all prospered in the city, which remains a strategic location for many niche areas of practice.

Last year, LexField, a specialist IP firm, enjoyed mandates from many major corporations including Johnson & Johnson and Honda Motors. Jan Liu, the managing partner of LexField, says: “Major government bodies, such as the State Intellectual Property Office and the Trademark Office under the State Administration for Industry and Commerce, are based here. Hence the majority of IP filing, prosecution and contentious matters are also handled here.”

Recognising the opportunities created by the government’s increased focus on enforcing IP rights, the firm further boosted its practice by appointing retired judge Cheng Yongshun as senior counsel last year.

Tiantong & Partners, meanwhile, has feasted on a specialised diet of civil and commercial cases at second instance and retrials, Beijing being where the majority of high-end litigation matters are tried.

The firm, one of the most active in  the Supreme and High Courts, saw a 30% increase in business last year and finalised 13 cases in the Supreme Court with a value of over US$700m. Managing partner Jiang Yong attributes the firm’s success to the financial slowdown. “Change in the economic environment has inevitably affected major business decisions, inducing dishonest behaviour and causing disputes,” he said. To deal with the influx of business, the firm added Wang Feng to its partnership in October last year.

In the highly specialised aviation field, Runming has handled its fair share of deals, advising the Export-Import Bank of China on a US$230m term loan facility to AerDragon for the purchase of six aircraft. The firm also advised Bank of Communications Finance Leasing on the sale and leaseback of two Airbus A340 aircrafts for China Eastern Airlines.

M&A and corporate sector firms like Guangsheng & Partners have managed to clinch heavyweight clients like Shell, Toshiba, General Electric, Gillette and Midea.

The successful emergence of these specialty firms has caused the country’s larger firms to feel the heat. “The boutique and specialist practices that are setting up now present a very strong challenge to the larger firms,” said King & Wood’s Zhang.

Large international firms such as DLA Piper share the same belief. “Specialty firms will make the market more competitive, creating pressure on best talents in terms of cost. International firms and Magic Circle firms might even start to take the view that some of the traditional areas are no longer profitable, drop them and take on specialties. There will definitely be more specialised firms, both domestic and international, in Beijing,” said Rocky Lee, partner at DLA Piper.

While lawyers agree that more and more specialty firms will begin to infiltrate the market, the question becomes which ones will manage to prosper and survive. Guangsheng & Partners’ Li Likai maintains that specialty firms will continue to thrive as specialised practice areas such as private equity, trade, competition and IP continue to grow in Beijing.

“When it comes to specialised practice areas, the first place international companies and lawyers will look is still Beijing,” said Li. “Amongst specialty firms, there isn’t as much competition and clients know exactly where to go for what they need,” he added.

Charles Li, founding partner of Han Kun, a mid-sized law firm involved primarily in providing cross-border legal services, agrees. “I haven’t felt much pressure from competitors. I believe that the number of specialty firms will increase, but I’m sure Beijing has room for the new entrants.”

Beijing firms: new office launches 2009 -2010*
Firm	Location
Dacheng	Los Angeles, Israel, Singapore, Malaysia, Nanjing, Nantong, Shengyang, Changchun, Guangzhou, Fuzhou, Wuxi, Qingdao, Urumqi, Taiyuan, Guiyang, Nanning and Huhot
Gaopeng	Nanjing
Guantao	Hong Kong and Tianjin
Han Kun	Shanghai and Shenzhen
King & Wood	Hong Kong and New York
Longan	Nanjing and Guangzhou
Zhonglun W&D	Riyadh
Zhongyin	Fuzhou, Wuxi, Jinan, Jixi, Taizhou, Shenzhen. Xiamen, Toronto and Frankfurt
*This table does not purport to be exhaustive

International firms continue to inundate Beijing
While the financial crisis has forced many international firms to freeze expansion plans and downsize, smaller foreign firms have sensed their ‘one-shot’ opportunity to launch in China and seize clients that were previously the well-guarded domain of the top-tiers.

Over the past 12 months, Beijing has almost become a rite of passage for international firms to take on Chinese business:  Winston Strawn, Latham & Watkins and Slaughter and May have all launched a Beijing presence. “This is an ambition we’ve had for some time… Beijing is an important component and now we’ve got it,” said Latham & Watkins’ Hong Kong-based partner David Miles. Yet the firm had to wait three years before realising its Beijing plans.

“To be based in Beijing is key. The city is the capital after all, and in a country where the political and bureaucratic arms of the state still flex major influence, all high-level decisions are made there,” said Martin Cauchon, partner at Gowling Lafleur Henderson and national leader of the firm’s China group. “As a result, a city once forbidden to foreigners now pulls them in, including law firms from everywhere from the US to Australia, eager to capture some of the deals flowing from China’s emerging economy.”

Yet while so many firms continue to open in Beijing it seems as though the market may quickly become saturated, Mallesons partner David Olsson says that the increasing numbers are not a worry: “The market is huge, the body of legislation is expanding, the transactions are becoming more complex and there’s an increased need for specialised advice.”

DLA Piper’s Lee, on the other hand, thinks the opposite. “The international market is already very saturated in Beijing so new law firms coming in will really suffer. A notable trend that I foresee is that the increasing competition might soon become a trigger for a trend of consolidation of practice areas in the bigger firms. There has already been some ‘musical chairs’ with different practice areas. International firms have been seizing capabilities from each other.”

Moving forward, lawyers are making their own predictions for what is to come in 2010. “We are seeing a massive increase in domestic fund formation, financial services and capital markets work. I foresee 2010-2011 to be a very good year for the capital markets sector,” said Lee.

International firms: new office launches in Beijing, 2009 -2010
Firm	Country
Winston & Strawn	US
Slaughter and May	US
Latham Watkins	US
Nishimura	Japan
Morris, Manning & Martin	US
*This table does not purport to be exhaustive

Largest PRC firms in Beijing*
PRC firms	No of partners	No of partners/ lawyers
Dacheng	332	835
King & Wood	190	800
DeHeng Law Office	85	675
Grandall Legal Group	102	419
Jun He	78	338
*Numbers are according to ALB China 20 – China’s largest law firm report; last updated July 2009