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Chinese law firms began opening offices in Hong Kong a decade ago. And while China’s legal market has changed dramatically since then, having a Hong Kong office is still important for the country’s firms.
Chinese law firms started flocking to Hong Kong just over a decade ago, drawn by the city’s potential usefulness as a base to help their clients – fast-growing Chinese companies – raise funds. The first batch arrived in 2006, and firms like the legacy King & Wood, JunHe and Duan & Duan were among the earliest to launch Hong Kong offices.
Chinese firms came to Hong Kong to focus on capital markets, and years later, that still remains the priority for many. As Lihua De, who has been a partner at JunHe’s Hong Kong branch since it opened, explains, “We only want to concentrate on capital markets work. Our Hong Kong office has developed alongside the needs of our clients, which are mainly state-owned and private-sector companies looking to invest abroad.”
As business activity by Chinese companies went up, the number of disputes also increased. This, coupled with the growing complexity of such conflicts, justifies why having an office in Hong Kong, the region’s top dispute resolution centre, is necessary. Fangda Partners, for example, launched its Hong Kong office in 2012 with litigator Peter Yuen from Freshfields Bruckhaus Deringer.
According to a list compiled by the Law Society of Hong Kong, there are 26 registered Chinese firms with offices in the city, though many of them have just a few partners based there. King & Wood, now known as King & Wood Mallesons after merging with Australia's Mallesons Stephen Jacques in 2012, is an outlier with 29 partners in Hong Kong. Red Circle firms JunHe and Fangda both have about 10 partners each.
STILL VITAL
Since Chinese firms first arrived in Hong Kong, the mainland has developed dramatically, doubling its wealth and now serving as home to many of the world’s biggest companies.
The country also started to open up in the last decade, and local businesses began raising funds domestically, threatening Hong Kong’s role as China’s gateway.
China recently announced it was building a new economic zone in Xiongan, outside Beijing. And with the variety of connections between stock exchanges, it is easier than ever for foreign investors to directly access China.
Despite these developments, Chinese firms continue to open offices in Hong Kong. Red Circle firm Haiwen & Partners, for example, said earlier this year that it was preparing to launch a Hong Kong office focused on capital markets.
Indeed, one crucial role that offices “Asia’s World City” will continue to play is that of an intermediary between Chinese clients and the rest of the world.
JunHe’s Hong Kong office, for example, has been acting as international counsel on a number of deals also involving the firm’s Chinese offices. Just over a month ago, JunHe acted as the international counsel – along with an Italian law firm – of a Chinese investor that bought storied soccer club AC Milan.
“The AC Milan deal is a great example of what the Hong Kong office can do,” says JunHe’s De. She also points out that in general, Chinese companies choose not to contact foreign law firms directly. As such, "the Hong Kong office will team up with the mainland offices as the international counsel, and help coordinate and complete the transaction.”
While the Hong Kong office serves as a go-between that connects Chinese companies with the rest of the world, it also does important work within the SAR itself.
Chinese companies are seeking to invest and raise funds abroad, and among their favourite destinations is still Hong Kong, one of the top IPO markets in the world. Just ask Alipay, Alibaba’s $60 billion financial services arm. The company is one of the most anticipated deals in recent years, and where is it hoping to have its IPO? Hong Kong.
To contact the writer, please email john.kang@tr.com
