A Challenging Year: An Appraisal of the Chinese Legal Market in 2022

Vicky Liu, Director at Hughes-Castell, is held in high esteem by clients and candidates in China’s legal market. In this interview with Agnes Wang from China Business Law Podcast, she discusses what China’s legal market looked like in 2022 under the influence of the pandemic, and the trends of Chinese and foreign law firms in China.

Q: Vicky, please describe the Greater China legal market in 2022.

In 2023, although law firms’ businesses in the region were generally quiet, some practices were busy during the year: dispute resolution (including international arbitration, restructuring & insolvency), IP, TMT/data privacy/cyber security, and compliance regulations. In contrast, there were practices deeply troubled by the pandemic. For example, corporate/capital markets/M&A have been quiet in 2022.

Q Could you tell us more about the development of Compliance practice in the Greater China region?

Regarding compliance practices, some Chinese law firms have done well. This is because they developed the field very early, were well-developed on quite a large scale, and have earned their strong reputations in the market.

Government regulatory requirements are becoming more and more stringent and fast-changing, so companies in China have an increasing demand for regulatory compliance. As a result, some Chinese law firms that do not have partners or resources in this area were willing to strengthen the development of regulatory compliance businesses to respond to market demands.

Besides compliance investigations and anti-corruption, FCPA-related compliance and audit checks on China-listed companies are in great demand in China.

Q: How was the legal recruitment market in China?

On Associate-level, overall, there were fewer vacancies in 2022. Summing up the experience of this year, the sources of new positions are as follows:

  1. The on-demand practices mentioned earlier need to keep pace with the increased business by hiring.
  2. Although the corporate and capital markets practices were less busy than before, law firms are still hiring for replacements when associates leave. Alternatively, the firms will see if internal reorganisation is possible.
  3. When a law firm recruited a new partner, but s/he did not bring her/his own team. Then, the law firm needs to build a new team for the partner.
  4. We have seen some joint-venture firms in recent years. Whenever there is a joint-venture firm established, it will typically recruit many associates. Despite that, this year, only a few joint ventures were hiring talent, such as in litigation and labour law practices.

On Counsel/Partner-level hires, we found that Chinese firms were much more active than international firms; also, more international firms’ partners moved or were willing to move to Chinese law firms than previously.

As mentioned above, dispute resolution and intellectual property practices were active in China. The firms that are well-renowned for these practices are Chinese law firms. Although some international firms have good litigation and IP teams in China,  they are still in the minority; also, these practices involve litigation work, so Chinese law firms are in a favorable position;

At the end of 2021 and the beginning of 2022, the Big Four accounting firms’ legal arms closed down, and these partners’ potential destinations attracted attention. Most of them have moved to Chinese law firms, Red Circle firms particularly, regardless of the practices. Most of them came from Corporate practice. Only a few chose international firms.

From these moves, one can infer that Chinese firms are the preferred choice to partners now.

Q: Do Chinese law firms tend to recruit talent from international firms? Or from other channels? Do you have any suggestions for the lawyers or partners of international firms about to leave?

Chinese law firms still welcome lawyers from international firms, especially their senior consultants or partners. In the meantime, senior lawyers of international law firms also think that Chinese firms will be their ideal stop for their career development. Chinese firms are very fond of lawyers with international backgrounds who have worked in international firms for many years and have overseas experience as well as mainland industry experience, which makes the offering of Chinese firms more international. Moreover, Chinese law firms can apply their partners’ international expertise to serve multinational corporation clients as if they were international law firms. Now the market has changed; well-developed Chinese law firms can play the lead counsel role for their multinational clients that international law firms previously performed.

Some international law firms got strength in litigation, life sciences, data privacy, or compliance teams overseas. The lawyers who work in their Chinese offices are Chinese law firms’ preferred recruitment targets because they are equipped with international expertise and local experience.

Regarding suggestions, it is hard to give one for all. The situation varies each time. Career development must be improved from the senior associate level and above. If you need to set up a new business/team in your new firm, most importantly, you have to ensure whether the firm has the resources and willingness to provide you with any necessary support.

Lastly, the lawyers should evaluate whether their background and expertise are a good fit for the firm and its client group. Whether is there synergy between you and the firm. Whether there be good cooperation between you and incumbent partners And whether you can work together to solve any problems. I have handled a complicated case of compensation negotiation recently. Although the processes were challenging, the partner was very pleased and full of confidence to join the new firm after the negotiation. The negotiation process encouraged him that he can work with the firm in resolving difficult situations.

Q: What other trends are there in China’s legal market?

The most apparent trend in the past two years is the continuous expansion of business areas of Chinese law firms. In addition to the established Red Circle firms, some Chinese firms are well-known for their specific practices or expertise and have continued to expand. Their goal is to provide one-stop services for their clients.

We saw more lateral hires returning to private practice. They left private practice to move in-house, and after a few years, they moved back to law firms. Most of them are taking partner roles. It is common in IP, TMT, Data Privacy, and Compliance practices. Why?

  1. Although the in-house legal department is vital for a corporate, it is only a supporting department. The development of lawyers within the enterprise is limited. Inprivate practice, lawyer’s professional career development seems relatively longer;
  2. Lawyers perfect law firms’ work and rhythm;
  3. Since these lawyers come from in-house,  they have greater insight and can provide solutions from their client’s perspective, better services fulfilling customers’ needs.

Q In the in-house recruitment market, which industries are more active?

The in-house legal recruitment market was stable this year. Even though during Shanghai’s lockdown law firms slowed down, in-house legal departments have been actively recruiting to preserve their department headcount. However, we saw a recruitment drop-off in the year’s second half.

Active industries: Medical/Life Sciences, Manufacturing, Startups (Electric Vehicles). Relatively quiet industries: Retail, Mobile Luxury, FMCG.

Q What do clients looking to hire in-house counsel value in ability, qualifications, and background?

There are several aspects the company will prioritse. At mid-level (4-7 yrs), legal )counsel/senior legal counsel – 1). an excellent legal background: graduated from a top-tier law school in China along with overseas education background and experience in any leading law firm, such as a Red Circle firm; 2). China legal qualification: more and more companies seek candidates with a Chinese Bar. Of course, an overseas bar, especially an American Bar, would be a strong plus; 3). In addition to corporate transactions, experience in general corporate/commercial, labor law, data, compliance, etc., are highly desirable; 4). Multinational corporations used to hire lawyers onlyfrom international law firms. Nowadays, many people prefer Red Circle law firms for their experience in China. Moreover, the quality of the lawyers in these RedCircle firms is outstanding, and their salary is relatively lower than their peers in international firms. Professional background, Chinese language skills, and expected salary levels make lawyers from Red Circle law firms very desirable in the in-house recruitment market.

For the private equity or investment bank recruitment market, companies prefer senior lawyers from international law firms with high-end, international transaction experience.

Last but not least, multinational companies need excellent written and oral English.

Q Any suggestions for lawyers who want to turn in-house?

As mentioned above, corporations will have more vacancies at 4-7 years PQE. So, for any private practice lawyer wanting to turn in-house, I first advise paying attention to opportunities after you have worked in a firm for 4 to 7 years. If you are searching for a more senior in-house role, you had better have acquired in-house and private practice experience.

While you are working in law firms, in addition to transactions, try to gain broader experience in labor law, data, compliance, IP etc. A wider skill set is more appealing in the in-house market.

Published by Hughes Castell

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