The Chinese government recently issued a policy paper outlining a plan to make the city of Shenzhen, just a 30-minute train ride from Hong Kong, into a leading global metropolis that would be attractive to international business and a model of stable prosperity. 

The timing of the document's release, which took place as anti-government protests continue to disrupt life in Hong Kong, was seen as a not-so-subtle message to the residents of Hong Kong that they should promptly halt the political unrest. And while few observers believe that Shenzhen threatens to usurp Hong Kong's importance in the world of international business—at least in the near term—the document's release spurred discussion about Shenzhen's possible rise as an international financial centre that one day will compete with Hong Kong.

To be sure, Hong Kong has what Shenzhen lacks: a common-law legal system, a low tax regime, free flow of information and a bilingual business infrastructure. But Shenzhen, which 40 years ago was a tiny fishing village, has grown rapidly under the guidance of the Chinese state. In 2018, Shenzhen's gross domestic product surpassed that of Hong Kong for the first time, by a small margin.

Shenzhen is home to China's top tech companies, including Huawei, ZTE and Tencent, and it is clearly on the rise. The policy document, released by China's cabinet, specified that business regulations in Shenzhen will conform to international standards, and the city will enact more favourable rules to spur acquisitions and investment.

Shenzhen will turn into "one of the leading cities in the world in terms of economic strength and quality of development" by 2025, the document's guidelines say. The city will become a "national model of high-quality development" by 2035 and a "top cosmopolis" worldwide by the middle of the 21st century.

To global law firms, Shenzhen has already shown its appeal. Since late 2017, three international firms have launched in the city. Two of the three—Brinks Gilson & Lione and Fish & Richardson—are intellectual property specialist firms, while the other one—U.K. firm Simmons & Simmons—said its Shenzhen office will focus on telecommunications, media and technology. In addition, Am Law 100 firm Perkins Coie is launching a Shenzhen branch for its Beijing-based intellectual property agency, in order to serve existing clients in the nearby region on inbound and outbound matters. Beijing-based IP partner Scott Palmer is leading that effort.

It's not surprising that firms have emphasised intellectual property and tech-related work in Shenzhen. Huawei, ZTE and Tencent, which are all based in Shenzhen, grew rapidly as they branched out globally and are now among the world's largest tech companies.

But most of the global firms active in Hong Kong have yet to be persuaded that they should open an office in neighbouring Shenzhen—in part because of its extreme proximity to Hong Kong. Among those already in Shenzhen, only Simmons & Simmons has a Hong Kong office. And the political unrest in Hong Kong won't change that, lawyers and industry observers say.

"The political tension in Hong Kong is of no consequence to those firms with offices or planned offices in Shenzhen or other parts of southern China," said Perkins Coie Beijing partner James Zimmerman. "Hong Kong is a very different market. Shenzhen must stand on its own to be attractive for foreign law firms."

Zimmerman, who has worked in China since the 1990s, believes Shenzhen can grow to be a viable market in its own right—both for global and domestic firms—and not just in the IP space.

"Shenzhen has moved up the value chain, including with respect to information technology, AI and disruptive technology, incubation, aerospace, life sciences, advanced manufacturing and so on," he said. "It's not only a logistics hub for south China, but it is also becoming a logistics and warehousing hub for Asia, with its port and airport expansion. The government is indeed keen to further develop a knowledge-based economy."

Norman Ho, an associate professor of Shenzhen-based Peking University School of Transnational Law, said international dispute resolution will likely be an area that will draw the interest of global law firms to Shenzhen.

Last year, the Supreme People's Court of China established two international commercial courts for cross-border commercial disputes, especially those arising from the Belt and Road Initiative. One of those courts is in Shenzhen. And as the international commercial court starts to hear more cases, Ho said there will be greater demand for specialised foreign law knowledge.

Likewise, Shenzhen is also emerging as an important venue for international arbitration. In 2017, China merged the Shenzhen Court of International Arbitration (SCIA) with the Shenzhen Arbitration Commission. According to Ho, the new SCIA is increasingly active and hosts an impressive roster of international arbitrators with legal training from jurisdictions around the world.

Simply put, lawyers say that as a legal market, Shenzhen will likely have different offerings than Hong Kong, even as it develops beyond IP.

"I don't view Shenzhen as an alternative to Hong Kong. They are clearly very distinct markets with distinct clients and distinct work," Zimmerman said.

Ho, who now teaches law at a Chinese law school that offers a U.S.-style J.D. degree and who practised U.S. securities law in Hong Kong earlier in his career, believes Hong Kong and Shenzhen offices can co-exist.

"Both cities can complement each other," he said. "Shenzhen is generally a much stronger tech and startup venue than Hong Kong. And Hong Kong is generally a much more international financial centre than Shenzhen."

But as Shenzhen opens its doors, can firms afford another office in China?

"I don't think this is going to be a trend," said one Beijing-based recruiter who hires for international firms, after learning recently of an international firm's intention to open in Shenzhen.

Global law firms, especially U.S. firms, are already struggling with their China practice, the recruiter noted. "People should consider themselves very lucky if they can sustain their Beijing and Shanghai offices," he said.

Hong Kong, meanwhile, will remain important despite Beijing's policy directive for Shenzhen, lawyers say. Its legal system, rule of law and business infrastructure will continue to draw in foreign businesses, including global law firms.

Even the current protests, which have prompted Chinese paramilitary forces to train across the border in Shenzhen, are seen by the business community as more of a short-term disruption than a permanent shift in confidence in the business environment.

In fact, lawyers say if their firms decide to open a Shenzhen office, that decision will not be driven by concerns about the recent political unrest in Hong Kong. Shenzhen will increasingly become an important global centre for IP, tech and international dispute resolution, prompting many foreign law firms to seriously consider opening a physical presence there—even if they already have an office in Hong Kong, Ho said.

"Hong Kong constantly bills itself as a 'gateway' to the vast market that is mainland China. But having a physical presence only at the 'gateway' isn't enough," he said. "To truly understand and appreciate the mainland, you've got to be there 24/7."