Law firms told to 'think big'
By He Sheng (China Daily)
Updated: 2004-08-07 00:55

Law firms of China need to become strong and think big in the face of increasing foreign competition, said Chinese lawyers in Beijing on Thursday.

There has been a trend among Chinese law firms in the past few years of growing big quickly by acquisition and merger.

The trend has been, in part, spurred by China's accession into the World Trade Organization three years ago, which will allow foreign law firms more opportunity to practise in China.

A number of large Chinese firms in cities like Beijing and Shanghai have gone through revamps and growth, hoping that scale will translate into more business opportunities and profits.

But that may not happen naturally unless mergers and acquisitions are carried out in right way, said Zhang Xuebing, a managing partner of the Zhong Lun Law Offices.

Zhang said there has been good reason for Chinese firms to think big as more and more foreign businesses invest in China and an increasing number of Chinese businesses begin to invest abroad as well.

Their business growth requires more comprehensive legal services, which normally are not available with small firms.

On the other hand, large foreign firms, using their offices in China, have kept squeezing Chinese firms' particularly in high-end areas, such trans-border commercial dealings.

Both require China's law firms to increase in size. Acquisition and merger has therefore become a means for China's law firms, which have only seen rapid development over the past 20 years, to grow big.

"Growing big has become a shared idea among Chinese law firms, but the key issue is how,'' Zhang said at a ceremony marking his firm's merger with the Beijing-based Yiwen Law firm.

The merger will make Zhong Lun one of China's largest firms, with 150-plus counsel based in three major cities in China and an annual revenue of more than 100 million yuan (US$12 million), according to Chen Wen, another leading partner of the firm.

The merger brought together talent and expertise of two different yet complementary practice areas, which constitutes the cornerstone of a successful merger, said Zhang.

Zhong Lun has been known for its expertise in real estate, banking and corporate legal service while Yiwen has established its reputation in foreign-related services and litigation.

Such a means of merger not only makes the firm bigger but, above all, stronger, said Zhang, who is a leading lawyer in real estate legal service.

However, mergers that have not worked out have not been rare among Chinese law firms over the past few years.

Some firms have grown bigger but have not stayed equally competitive at the same time.

"Chinese law firms should not go big just for its own sake,'' Zhang said. "That's not the way to success, especially when competing with foreign law firms.''

Upon its WTO entry at the end of 2001, China pledged that it would further open up its legal-services market, gradually lifting the geographic and quantitative restrictions on representative offices of overseas law firms.

Overseas law firms have now been given the green light to provide clients with consultation on foreign law and to entrust Chinese law firms to deal with Chinese legal affairs, according to a regulation issued by the State Council at the end of 2001.

So far, up to 200 foreign law firms have set up offices in China. Of the world's top 50 international law firms, more than half have set up offices in China.

"You have to compete with them by providing quality, specialized services clients feel of value to them, not simply because you are big,'' Zhang said.

He said the central issue for a merged large firm was to establish sound internal management and partnership culture. "It's the key to a firm's competitive edge,'' he said. "That's what we are now working on.''

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