In this article, our China Director Shawn Chen collected and analysed data on the partner and experienced associate hires made by the China offices of major international law firms in 2018. In this particular time of uncertainty, we hope this data and analysis can assist our clients in making better judgements and predictions on how the legal market in China will evolve and develop in 2019 going forward.
Partners & Teams
How many partners were hired?
SSQ has been tracking partner moves in China for years. According to our research over the past three years (2016-2018), a total of 72 partners were hired by 32 major international (US/UK headquartered) law firms in Beijing and Shanghai. A breakdown by year and locations is as follows:
A notable change in 2018 is the obvious drop of partner hires from previous years. We believe this is mainly attributed to the increasing fee-earning and profit-making pressure all international law firms are facing in the China market. In addition, the fierce competition from and the quick development of their peer Chinese law firms are making most US/UK law firms more difficult than ever in hiring quality laterals. In contrast, many partners are moving in the opposite direction, from international to Chinese law firms.
Who hired these partners?
A breakdown of these 72 partner hires by law firm and year is as follows:
In 2018, the 21 hires were made by 18 firms. Only three firms (i.e. Orrick, Cooley and Perkins Coie) made more than one hire, which means all other firms hired only one partner in the whole year. This reinforces the assessment above that international law firms’ interest and ambition in investing in the China market has decreased to a historically low level. Morgan Lewis made the most hires in the past three years in China for their newly launched Beijing and Shanghai offices. DLA Piper continued to push to grow in China by hiring five partners between 2016 and 2018. It’s evident how the other two most aggressive hiring firms, Clyde and Baker & McKenzie, made their success (six and five hires respectively). The majority of their partner hires were through local Chinese alliance firms instead of their own China representative offices. Without the unique local alliance set-up, it’s highly likely that these two will have the same poor results as the other 30 firms as shown above, i.e., 1-3 hires only in three years.
What practice areas were taking new partners?
A breakdown of hires by nine main practice areas is as follows:
Corporate/M&A has always been the most active hiring area, which reflected the market reality that almost all international law firms in China focus in this space and the whole market is at high level of homogeneity and competition. Intellectual property remains a hot practice in China because more prosecution and enforcement work will come from the enlarging China operations of foreign investments business and serious IP litigation work are also quickly increasing in China and globally. It’s worth noting, in recent few years projects and dispute resolution practices are attracting hiring attention. The former is mainly driven by the Chinese government’s ‘Belt-Road’ efforts while the latter is cyclical because transactional matters are getting less and many outbound investments by Chinese companies are facing problems overseas.
How many experienced associates were hired in 2018?
Although partners hire activities slowed down dramatically in 2018, we did not see any obvious drop of experienced associates hires by international law firms in China. This reflected international law firms’ continued commitment to this challenging but promising market – as long as there is a chance to hire and grow, they will do it, but prudentially at low-cost (associate level) only.
How much were these associates paid?
We categorized the 64 experienced associates’ compensation by three main financial thresholds as follows:
Almost 80% of the hires SSQ made for clients in 2018 were paid below CNY 1 million a year, while the remaining 20% were at the senior associate / counsel level paid above 1 million. This is in line with the hires we made in previous years which indicate the same pattern that international law firms in China always try to manage the staff cost as long as their midlevel and juniors could service the work.
What practice areas were taking experienced associates?
A breakdown of the 64 hires by nine main practice areas is as follows:
Similarly to the partner and team hires, corporate/M&A and IP are the two most active hiring areas. The capital market business in the past year of 2018 boomed again after a few years’ of slowing down. A few magic circle and Wall Street firms made profitable revenues in 2018 by helping Chinese companies raise funds in the Hong Kong and US market, so they hired expensive associates again. Associates with dispute resolution skillsets will just become more popular in the quickly evolving China market – the same for associates with other niche expertise such as anti-trust and projects.
If you would like to find out more about the China legal market, please contact the following SSQ consultants:
Shawn Chen (Law Firm Strategies and Partners/Team Hires)
Betty Chen (Associate/Counsel hires)