Chinese firms keep a low profile in the US, but ambitions grow
While U.S. law firms have expanded heavily in China, peaking with Dentons’ Swiss verein merger with Beijing-based Dacheng Law Offices, there has been little movement as yet in the opposite direction by Chinese law firms.
Even the largest Chinese firms tend to have quite small offices in the U.S. Beijing’s King & Wood Mallesons only has three partners based full time in its New York City and Silicon Valley offices out of 550 partners and 2,700 lawyers worldwide. Another leading Beijing firm, 1,100-lawyer Zhong Lun Law Offices, only has two partners in its New York office.
T. K. Chang, a New York partner at Zhong Lun, says Chinese firms have traditionally only had “window offices” in the U.S. Such offices aren’t really meant to actively practice law—they mainly serve as a base for overseas partners to market their firms’ China practice to American clients and build relationships with U.S. law firms.
Chang says Zhong Lun’s New York office still serves that function. Managing partner Peng Wu recently gave a presentation to clients of Cravath, Swaine & Moore about Chinese antitrust regulation. (Wu represented Qualcomm in a competition investigation in China that resulted in a $975 million penalty for the U.S. mobile chipmaker.) Zhong Lun is particularly interested in building referral relationships, Chang says, with top-tier firms that don’t have their own offices in China, such as Cravath and Willkie Farr & Gallagher.
At the same time, Chang says, Zhong Lun can handle small-scale U.S. transactions on its own. The firm recently advised a Chinese venture capital firm in its $20 million investment in ride-sourcing giant Uber. “So we’re sort of in between being a window office and something more,” he says.
GO-BETWEENS
Xiaomin Chen, who heads DeHeng Chen, the New York arm of Beijing’s DeHeng Law Offices, says the 1,300-lawyer firm’s U.S. partners, most of whom immigrated decades ago, act as go-betweens for their Chinese clients doing business in America, advising them on their dealings with local law firms.
“There’s a trust based on shared language and background,” Chen says. “So even when it’s a really big deal and they are working with a large U.S. law firm, they still want us there to serve almost like their general counsel.”
Chen says that DeHeng Chen, with 25 lawyers, is somewhat larger than most Chinese firms’ U.S. offices. Before tying up with DeHeng in 2001, Chen notes that he and his partners had a small firm in the World Trade Center with an active practice advising the many Chinese trading companies then housed there.
“It was all trade deals back then,” he says, “companies trying to sell their goods in America or buying things to sell back in China, importing and exporting.”
Now the deals between the two countries are much bigger, and Chinese law firms are weighing whether they should expand to capture more of that work rather than hand it off to U.S. firms.
“We’ve drawn up a pretty ambitious expansion plan,” Chang says, noting that Zhong Lun’s partnership was to vote on it (results were not available before deadline). The firm is aiming to be one of the top firms in the world over the next decade or so.
Chen says he could see more Chinese law firms taking a page from Dentons and merging with large American firms that can handle bigger cross-border deals. But he also thinks expansion in the already well-lawyered U.S. shouldn’t necessarily be a priority for firms that have a huge and still-growing, still-developing legal market back home.
“However much Chinese investment in the U.S. grows,” Chen says, “it’s still going to be a very small amount compared to the growth of the Chinese domestic market overall.”
This article originally appeared in the November 2015 issue of the ABA Journal with this headline: “China in the States: Firms keep a low profile, but ambitions grow.”
