Eversheds' Asia managing partner on the opportunities thrown up by the globalising Chinese legal sphere

According to the Chinese zodiac, 2011 is the year of the golden rabbit, a year in which to catch the breath and calm the nerves. But not for Chinese law firms. The year has seen remarkable activity in the Chinese legal market, most recently a London office opening, a rumoured Sino-Australian hook-up and multiple lateral hires. And there is reportedly much more to come. This has caused Anglo-Saxon law firms to sit up and take notice.

At a time when UK and US firms are competing for places in an elite global law firm club of the future, a handful of Chinese firms are expanding globally. The two largest firms (by headcount) in China, Dacheng and Yingke, have recently announced plans to open offices in London. This follows the earlier news of King & Wood's planned association with Australian firm Mallesons Stephen Jaques.

Sitting in Hong Kong, on the edge of most populous country in the world, gives one a very different perspective on the global economy and global law firm hierarchy. The UK and US feel very far away, particularly in the current climate in which Asian economies are showing positive growth while the rest of the world has yet to recover from the financial crisis. And as the Anglo-Saxon law firms are already shifting their own axes towards Asia, it is hard to see the old balance of power enduring for much longer.

Many in the legal press and behind the scenes have responded with alarm. And it is true that there will be no stopping this forward trajectory. But now is not the time to panic. We should view the internationalisation of the Chinese legal market as an opportunity and not a threat.

Why is this recent expansion so threatening? What concerns the market most is the perception of an uneven playing field. In China, as in India, protectionism within its own borders ensures that international law firms are unable to practise. In Europe and America, however, there are no restrictions to incoming law firms and so the Chinese law firms have free reign.

beijingAnd Chinese firms are starting to adopt Western-style partnership structures facilitating overseas expansion. The traditional 'eat what you kill' remuneration structure did not create favourable conditions for start-ups in new jurisdictions. But times are changing; King & Wood has been operating along Western-style partnership lines for some time, which made possible its expansion into Hong Kong and now possibly Australia.

Meanwhile, internal, intra-Asian trade and demand is key, and will continue to be for the next few years while the world economy recovers. And it is the huge populations of Asia, with rapidly developing middle classes and increasing affluence, that are driving growth in the global economy and fuelling huge and rapid responsive growth in their own legal sectors.

But a bit of circumspection is called for here. The legal sector is not a barometer for the rest of the economy, it is a reflection of it. The Chinese are already making their presence felt in many other spheres. The country has money to invest and is investing heavily in emerging markets – notably Africa, Asia and South America. The call by the European Union for Chinese assistance with its own financial crisis is indicative of the new world order and, like it or not, the legal sector will follow. So global law firms should be focusing on the positive: the dominance of English and US law systems has allowed Anglo-Saxon firms to flourish and to lead the pack for well over a decade. The UK and US professional service sectors are now well-matured, with years of experience behind them. They have been building global platforms and are free to do so in almost every jurisdiction.

And why should expansion spell one-way traffic? The increasing presence of Chinese firms in Europe should presage increasing opportunities for firms to benefit by providing English law advice. International firms are currently mining the rich seam of outbound work from Chinese companies looking to acquire, invest or raise funds in Europe, the US, Africa and South America. At the moment the People's Republic of China (PRC) firms do not have the reach to service that work and there is still a significant gap between the capabilities of the international firms and the vast majority of PRC firms. This creates a window of opportunity for international firms to build expertise, experience and relationships in China. But the gap is narrowing.

The best defence for international firms is a focused international growth strategy driven by quality and, of course, building strong relationships with local PRC firms. Law firms that have been working to create these synergies are benefiting from the lucrative referral work available and forging new relationships by proxy with Chinese companies and institutions.

So perhaps, after all, now is the time for international firms to calm their nerves and draw breath.

Nick Seddon (pictured) is Eversheds' Asia managing partner.