find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
Pinning hopes on China

Pinning hopes on China

Clare Buttner looks at whether Australian firms are ready to service the next great superpowerALL OF Australia’s top-tier law firms predict success in Asia will be crucial to their future…

Clare Buttner looks at whether Australian firms are ready to service the next great superpower

ALL OF Australia’s top-tier law firms predict success in Asia will be crucial to their future growth. As mainland China liberalises its economy, firms will be looking to capitalise on its emerging markets, but are facing stiff competition from the same UK and US firms that managed to get a foothold in Hong Kong long before Australian firms did.

The latest Bloomberg M&A league tables for China (including Hong Kong) show Australian firms have slid down the list of top performers over the last 12 months. In fact, not a single Australian firm ranked within the top 20 performing firms by deal count or volume during the second quarter of 2007, despite dominating the Asia-Pacific (excluding Japan) and Australia/New Zealand tables.

In contrast, during the same period in 2006, Allens Arthur Robinson, Mallesons, Minter Ellison, Blake Dawson Waldron and Gilbert + Tobin all ranked among the top 20 performers by either volume or rank.

While these figures may tell us something about how Australian firms are performing in China as a whole, Jim Dunstan, executive partner, Asia, for Allens Arthur Robinson says these results aren’t particularly meaningful for assessing how Australian firms are performing in mainland China, which is viewed as a growth area.

“M&A means a lot in the Australian market but doesn’t mean a great deal in the China market. It’s not core business in China as it might be in Australia,” he said.

Dunstan says the Bloomberg results are driven by Hong Kong deals.

Firms are hoping that they will be more competitive in mainland China than they have been in Hong Kong, where UK firms have had an advantage due to Hong Kong being a British territory until 1997.

Their success will largely depend on Australian investment in mainland China, which has lagged compared with Australia-China trade. According to the Department of Foreign Affairs and Trade, only 0.3 per cent, or approximately $2 billion, of Australia’s total foreign investment (around $680 billion) in 2005 went to China, up from 0.2 per cent in 2002—04.

Ian McCubbin, a partner in Deacons’ Melbourne office, says the lack of Australian investment is the reason our firms aren’t getting to work on big deals such as those featured in the latest M&A tables.

“Australian companies have not generally embraced investment in China, compared to European and US companies. We’ve seen a few of the banks and insurance companies make some investments in China, but compared to the level of investment from the UK and Europe they are hardly on the radar. What that means is that European and US capital dominates M&A,” he says.

As a result of this limited capital investment, Australian law firms have modest resources compared to their US and UK counterparts, something McCubbin says makes it difficult to attract work from US and UK companies who are doing the big deals in the region.

The sheer size of the UK and US firms make them formidable competitors. For example, global firm Baker & McKenzie has 235 legal staff across China, while Freshfields Bruckhaus Deringer has 160 lawyers and Herbert Smith has 128. All of these firms dwarf Mallesons’ 70 lawyers — the largest presence in China of any Australian firm.

Fred Kinmonth, head of corporate for Minter Ellison in Hong Kong said Australian firms have a way to go before they will manage to compete with the major players at the moment.

“The straightforward fact is that even though these firms are very large in Australia, they are relative latecomers to the market [in China] and the number of Australian firms operating in Hong Kong is really very small,” Kinmonth says.

Kinmonth believes the trick to surviving and becoming competitive will be differentiation.

“The pie is very large. There is room for everybody and what the Australian firms have to do is make the most of their natural advantages to corner their share of the market. That doesn’t mean competing but exploiting the characteristics of Australian firms that make them different,” he says.

“At Minters we are doing a lot of project work, resources related project work, construction and infrastructure and the corporate and commercial aspects of that. We are also focusing on private equity because Australia is the largest market for private equity in Asia.”

Dunstan says AAR is focusing on foreign direct investment, banking, real estate and mining in mainland China — a move that is proving very profitable.

“We have about 30 lawyers in China working flat out, long hours, high production, and who are highly profitable — more profitable than the average Australian partner,” he says.

Australian investment in China is expected to pick up in the coming years as China opens up its banking and services sectors, while increasing Chinese investment in Australia will also lead to more work for Australian firms.

“We are beginning to see Chinese companies — mainly Chinese Government companies — investing in Australian capital markets. As China’s investments in Australia diversify away from resources we will see more China involvement in our capital markets which will lead to substantial work for firms here in Australia,” McCubbin says.

“I personally even heard talk in Chinese Government circles in Beijing of possible takeovers of some of the major global resources groups by Chinese Government companies, including some major Australian companies. There is no question that they have deep enough pockets to seriously contemplate that.”

Kinmonth agrees that the rapidly changing economics of Asia will benefit Australian firms.

“We are seeing economic flows in the reverse direction. The number of Chinese companies investing in Australia is increasing dramatically. I think you will see Australian firms increasing their share of the work in China and Hong Kong quite rapidly,” Kinmonth says.

At present, restrictions remain in place for foreign lawyers operating in China, but Dunstan is confident that when China relaxes these regulations Australian firms will be well positioned to take advantage of another growth stage.

“We are very confident that China will ease restrictions [on foreign lawyers] as the years go by. And then we would expect there to be another major growth phase, in terms of the size of practices, because of the access it gives to the domestic market,” he said.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Pinning hopes on China
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...