China has a growing importance in the Asian legal recruitment market, with many lawyers moving to where the big business is in order to provide the necessary support services. One of the relatively few brakes on non-domestic legal expansion in China has been the PRC's regulatory framework.
However, certain barriers to foreign business activity in the Chinese market are coming down, not least because of China's membership obligations to the World Trade Organization. Over the past few years, this has led to foreign law firms setting up offices and growing rapidly in China.
The recent announcement that the first foreign banks have been given final regulatory approval to incorporate in Shanghai is an important step for the development of China's legal market. The four banks in question - HSBC, Standard Chartered, Bank of East Asia and Citigroup - are likely to be the first of many. Several other banks, such as Overseas Chinese Bank, DBS Bank, Bank of Tokyo Mitsubishi and ABN Amro, have already received initial approval, while applications from others are said to be pending.
While these overseas banks and others already have a presence in China, local incorporation will enable them to extend their operations to include a wide range of renminbi-denominated services. From a legal recruitment perspective, the most obvious short-term consequence will likely be an increase in the number of in-house banking positions in China, particularly in Shanghai, which seems to be the preferred base for the majority of banks.
As the foreign banks will cater to a raft of big start-up businesses, there are likely to be opportunities at all levels, both on the legal and compliance sides. These businesses will also undoubtedly generate a very significant amount of work that is over and above that which can be dealt with by the in-house legal teams. Accordingly, there is likely to be a big growth in banking and finance work for law firms in Shanghai, which in turn is likely to create increased demand for finance specialists within those firms.
However, the most important likely effects of foreign banks gaining full access to the China market is a reduction of work in other financial centres in the region. The previous regulatory impediments to foreign banks incorporating in China provided other Asian financial centres, most notably Hong Kong, with a huge advantage over Beijing and Shanghai.
Now that the door is open for the region's key banks to incorporate in China, and with many of them seeking to do so, the PRC and its key cities have genuine potential to develop rapidly into much more serious financial hubs. Hong Kong's dominance as the region's financial centre is suddenly under serious threat. A great deal of the territory's business is closely tied to its status as a financial centre, which has developed in large part due to its status as a window to China. In turn, this has provided significant justification for leading international law firms to base their Asian operations in Hong Kong. However, if the door to China is open, there is little need to enter through Hong Kong's window.
In the event that big banks begin to shift the focus of their operations to Shanghai, the possibility also exists that over time it will also become the region's legal capital. That said, there are undoubtedly other issues to be taken into consideration, such as the attractiveness of Hong Kong's legal system over that of China, the inertia involved with moving office and Hong Kong's impressive infrastructure. Nevertheless, with China continuing to open up to overseas investment, Shanghai will become increasingly important to international law firms and as a base for in-house legal teams.
Email: conorgreene@law-alliance.com
Website: http://www.law-alliance.com