As the Chinese economy booms and more firms turn their attention to mainland China, some have questioned Hong Kong's long-term viability as a global financial hub. Claire Chaffey discovers why, despite this threat, Hong Kong remains the place to be for lawyers from all over the world.
When speaking to those in the know about the legal services market in Hong Kong, the good news is that the shadows of the economic downturn have been replaced by sunshine.
Stilted economic flows have made way for a market enjoying some buoyancy, especially in the private equity and venture capital space. The amount of initial public offerings (IPOs) is increasing as a swathe of mining and resources companies - not present couple of years ago - list on the Hong Kong Stock Exchange and satiate China's bottomless appetite for commodities.
And while this period of economic sunshine must be met with an air of caution, given the ongoing economic woes of Europe and the US (and the fact that the global economy is so deeply interconnected), things in Hong Kong are, quite simply, very good.
A direct result of the ever-increasing commercial and financial activity in Hong Kong is a boom in the number of law firms jostling to secure a place in Hong Kong's central business district.
According to Hong Kong-based Minter Ellison partner Fred Kinmonth, Hong Kong is well and truly at "the top of the list" when it comes to cities with the greatest number of law firms present.
"All the major US law firms are here, both west coast and east coast. All the big London firms are here, and there are more arriving. You also have firms from the Cayman Islands - the offshore firms are all fully represented here - plus you have all the local firms. There is continuous activity"
Fred Kinmonth, partner, Minter Ellison - Hong Kong
"All the major US law firms are here, both west coast and east coast. All the big London firms are here, and there are more arriving. You also have firms from the Cayman Islands - the offshore firms are all fully represented here - plus you have all the local firms. There is continuous activity," he says.
"The business area in Hong Kong is absolutely full and rents are going through the roof. More and more people are coming here and prepared to pay the high level of rent. They could be looking elsewhere and perhaps going to Singapore or into China, but they're not. They're coming to Hong Kong in steady and increasing numbers."
According to Kinmonth, this landscape provides opportunities for lawyers which are both exciting and challenging, with knowledge of Hong Kong's complexity and diversity being key to whether they will sink or swim.
"It's definitely a very interesting place for lawyers to be, but it is a very complicated market. One has to really understand it if one is going to be successful," he says. "There are a lot of firms that feel they just have to have a Hong Kong address on their note paper to impress clients of the fact that they're global, and I'm not sure whether they really make any money here. On the other hand, people with a strong brand and who have found their niche do make a lot of money here."
In for the long haul
Kinmonth has been in Hong Kong for around 30 years. He adds that those who really want to succeed in Hong Kong need to commit to the place for more than just a few years, and the decision to stay for extended periods of time is a trend he is seeing more of.
"At a more junior level, people come and go because they want to experience Asia and do three or four years and then move on," he says. "But if one is going to progress and build one's own practice, you just have to stay here. If you look at the firms that are successful, the people at the top end have all been here for ages. They are really permanently based here."
According to Hong Kong-based Baker & McKenzie partner David Fleming, who has been in Hong Kong for around 20 years, sending lawyers to Hong Kong is a growing trend driven by two primary factors.
"There is an acceptance that experience outside one's home jurisdiction, whether the home jurisdiction is Australia or elsewhere, really enhances the skills and abilities of lawyers, at all levels of seniority, to provide quality assistance and service to their clients"
David Fleming, partner, Baker & McKenzie - Hong Kong
"There is an acceptance that experience outside one's home jurisdiction, whether the home jurisdiction is Australia or elsewhere, really enhances the skills and abilities of lawyers, at all levels of seniority, to provide quality assistance and service to their clients," he says.
"One of the other factors is a combination of increasing expansion and growth of international and domestic law firms already in Hong Kong, and an increasing wave of new entrants - US or European firms - whose domestic markets aren't registering the same kind of growth."
By all accounts, the importance of Hong Kong as an international financial and commercial centre is no longer in dispute. And that, for Australia, is very good news.
"It is amazing the difference that exists only relatively recently. Two years ago I don't think it was apparent to a number of my Australian partners how important it is to have strong connections with this part of the world," says Kinmonth. "Now, with the enormous economic flows between Australia, New Zealand and China, there is nobody in the firm who doubts whether we should have a strong presence in Hong Kong."
According to Sydney-based Baker & McKenzie partner Steve Glanz, Hong Kong is an essential driver of business both in and out of China.
"The Hong Kong office is key to driving business to Australia, introducing outbound investment from Hong Kong and China to the Australian office, capturing it at an early stage and ensuring that it is captured at this end"
Steven Glanz, partner, Baker & McKenzie - Sydney
"The Hong Kong office is key to driving business to Australia, introducing outbound investment from Hong Kong and China to the Australian office, capturing it at an early stage and ensuring that it is captured at this end," he says. "There is a lot of outbound business from Australia as well, so the Hong Kong office is important in helping us look after our clients, and shepherd them through investments in Hong Kong and China. It's a two-way street."
Even as the giant of mainland China looms in the distance, Fleming says that Hong Kong remains a stable financial hub which is not threatened by China's growth.
"I suppose the proportion of our lawyers, over time, is increasing in mainland China offices, but not to the diminution of people in Hong Kong," he says. "It is a growth story. We are seeing Hong Kong significance, not just for our office, but as an international financial centre and a gateway for trade and commerce, as continuing."
Kinmonth agrees. "I am an enormous believer in Hong Kong. People are constantly talking about financial activity moving to Shanghai or Hong Kong losing its position. I really do not believe that there is any chance of that happening, for a whole range of reasons, most of which are related to the rule of law, language, the depth of expertise here in the financial world, and the quality of life here," he says.
"All of these things are fundamentally important to its success, and as China becomes more sophisticated and the RMB becomes increasingly used as an international offshore currency, Hong Kong is just going to get stronger and stronger."
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