来源 / 智合
Hello everyone. I’m Luckie Hong from Intelligeast. Today I’m going to share with you some research and my personal thoughts on the topic “In China, In Future”.
My speech will go with three parts:
First, a brief introduction to China’s legal market and comparative analysis between Chinese and British legal markets.
Second, the internationalization of China’s legal market and Chinese lawyers.
Third, the openness, growth and potential of China’s legal market.
I. Comparison of Total Revenue Between Top Chinese Law Firms and Top UK Law Firms
2017年，中国Top 30律所的总创收达到了 323.77 亿元人民币（约合 36.91 亿英镑），相比于2016年的 261.47 亿元人民币（约合 29.81 亿英镑），增长了23.83%；相比于2013年的 129.54 亿元人民币（约合 14.77亿 英镑），增长了149.94%。这五年时间，其年化增长率为20%。
In 2017, the overall revenue generated by Top 30 Chinese law firms has increased to 3.691 billion pounds, with a growth rate of 23.83% over 2.981 billion pounds in 2016. Compared to the data in 2013, which is 1.477 billion pounds, the growth rate is 149.94%. Over the past five years, the annual growth rate is 20%.
目前，中国Top 30律所的权益合伙人人均利润（profit per equity partner）为 425.74 万元人民币（约合 48.5 万英镑）。
Right now, the profit per equity partner has reached 485 thousand pounds among Top 30 Chinese law firms.
Let’s compare these data with that of top UK law firms. This chart shows the ranking of top10 UK law firms in global legal market according to the total revenue of financial year 2018.
全球创收最高的十家英国律所总创收达到了 102.73 亿英镑。
The total revenue of top10 UK law firms has reached 10.273 billion pounds.
Clifford Chance, Allen & Overy, Linklaters and Freshfields, these four from the Magic Circle, take the Top 4 ranks.
若将“魔圈所”与“银圈所”进行对比，我们发现，两家核心“银圈所”Macfarlanes和Travers Smith虽然总创收与“魔圈所”相比有所差距，但是PEP却非常高。Macfarlanes的PEP超过魔圈所平均水平，为 174.4 万英镑，增幅26%；TraversSmith逼近魔圈所，超过所有大型/中型国际所，为 120 万英镑，增幅24%。
We can see here, although the total revenue of Macfarlanes and Travers Smith, which are two core members of Silver Circles, still fell behind Magic Circles, their PEP is very high. The PEP of Macfarlanes surpasses the average level of Magic Circles with 1.744 million pounds and a growth rate of 26%. The PEP of Travers Smith is very close to the Magic Circle, which is 1.2 million pounds with a growth rate of 24%, and this number surpassed all the international law firms of large scaleand medium scale.
中国的“红圈”律所，2017年的总创收为103.47亿元人民币（约合11.8亿英镑），权益合伙人人均利润为 700 万元人民币（约合 80 万英镑）。
As for the Red Circle in China, the total revenue of 2017 is 1.18 billion pounds, and the average profit per equity partner is around 800 thousand pounds.
Clearly there is a gap between top Chinese law firms and top UK law firms. However, in light of the growth rate of legal market in China, this gap will surely be narrowed in the future ten years.
II. The Expansion of Top Chinese Law Firms
According to Asia-Pacific 100 2018 by The Lawyer, there are currently 8 Chinese law firms with more than 1,000 Qualified Lawyers. They are Yingke, Allbright, Grandall, King & Wood Mallesons, ZhongYin, Beijing DHH and Zhong Lun. There are 8 Chinese law firms with Qualified Lawyers ranging from 500 to 1000. They are Longan, Tahota, Kangda, Zhonglun W&D, JinchengTongda & Neal, Guantao, Guanghe and TianTai.
If we pay attention to the growth rate in the past five years, the following law firms have the most rapid growth in the number of qualified lawyer:
Beijing DHH has the largest increase in the number of Qualified Lawyers, which increased from 313 to 1438, with a growth rate of 359.4%. In addition to Beijing DHH, there are 7 law firms with a growth rate over 100%, which are JinchengTongda & Neal, Allbright, Tahota, DeHeng, Yingke and Guantao.
The trend of expansion among Chinese law firms is closely related to not only China’s accelerated economy growth, but also the development goals of Chinese top law firms, that is, large scale, comprehensiveness and internationalization.
With constant expansion, Chinese law firms are eagerly exploring new management mechanisms, paying more attention to the quality of development and professionalism.
Refined management, improved process, visualized process and professionalism are the key factors that contribute to the modernization of Chinese law firms in the information era.
III. Trend of Application of AI in Legal Services
With extensive exploitation of Legal AI in China, the application of high-tech in legal services is becoming an unavoidable trend.
As for the products, the four most common types are legal research, document review, case analysis and AI consulting.
As for the participants, there are not only tech giants such as Tencent, Alibaba, Baidu and iFLYTEK which offer comprehensive AI technology and solutions, but also info-tech platforms and companies focusing on the vertical of legal industry.
Customers’ most desired products are AI consulting, lawyer matching, and legal support for in-house legal counsels. Given this situation, the application of technology in legal services, such as big data analysis, eDiscovery and SaaS platforms, are becoming more and more common.
Nowadays, more and more courts have begun to adopt online public trials to hear cases. On the one hand, the rapid development of Internet provides the basis of instant messaging. On the other hand, the C2J system are becoming more and more useful.
In Shanghai, the C2J system has been applied in different types of cases including criminal, civil and commercial and administrative cases, with multiple core modules such as data library, case handling applications and online platform. The software contains 6 core techniques along with another 18 techniques which provide strong support for courts.
The “going out” strategy of Chinese corporations featuring overseas listing, M&A and investment and financing, has shown an upward trend in recent years, and the future growth is optimistic.
At the end of June 2018, the National Development and Reform Commission and the Ministry of Commerceissued the “Special Management Measures for Foreign Investment Access (NegativeList) (2018 Edition)”. The subjects of the new negative list have been reduced from 63 to 48. The market access has been broadened in the primary industry, secondary industry and service industry, involving finance, transportation, trade circulation, professional services, manufacturing, infrastructure,energy,resources, agriculture, etc. 22 major opening policies were launched in these industries.
At the 2018 Summer Davosin Asia, China stated that it will expand its opening up to promote domesticindustrial transformation and upgrading; China will always defend the rule-based multilateral trading system.
北京时间9月27日，全球第二大指数公司富时罗素宣布将中国A股正式纳入其指数体系。在三个月前，A股已被全球第一大指数公司纳入了MSCI国际指数体系（Morgan Stanley Capital International Index）中，成功入“摩”。
On September 27th,Beijing time, FTSE Russell, the world’s second largest index company, announced that China’s A-share was formally included in its index system. Three months ago, A share was included in the MSCI (Morgan Stanley Capital InternationalIndex) by the world’s largest index company.
All these reflect that China, the world’s second largest economy, is determined to remain open and embrace the economic globalization.
In this part, I would like to talk about the opportunities brought by the “Belt and Road Initiative” initiative (hereinafter “B&R”) for law firms in China and UK, the implication of the upcoming Shanghai-London Stock Connect Plan and the internationalization of the Chinese lawyer industry.
I.Opportunities Brought By the “Belt and Road Initiative” To Chinese and UK Law Firms
The essence of B&R lies in the “Five-Pronged Approach”, that is, Policy Coordination, Connectivity of Infrastructure, Unimpeded Trade, Financial Integration, and Closer People-to-People Ties.
In December 2017, Douglas Flint, former Chairman of HSBC Group, was announced as the Chancellor’s City Envoy to the BRI, and a City Expert Board will be established to jointly promote the B&R cooperation between China and Britain.
In January 2018, British Prime Minister Theresa May made her first official visit to China, reached abroad consensus on enhancing B&R cooperation with China and claimed her visit “will intensify the golden era in UK-China relations”.
The UK is a leader in the global financial industry. One key to the success of B&Ris to fully mobilize international financing capabilities, which need world financial centers like London to participate.
In the execution of the B&R initiative, lots of legal issues are bound to exist in the areas of investment, finance, infrastructure construction and dispute resolution. There solution of these issues requires the joint effort of Chinese lawyers and British lawyers.
II.The Upcoming Shanghai-London Stock Connect Plan Marks the Further Opening of China’s Financial Market.
On August 31, 2018, the China Securities Regulatory Commission publicly solicited opinions on the“Regulations on the Supervision and Exchange of Depositary Receipts in the Shanghai Stock Exchange and the London Stock Exchange (Trial)”. The arrival of the “Shanghai-London Stock Connect” marks the further progress of the internationalization of A-shares and the further opening of China’s financial market.
Shanghai is not only the financial center of China, but also the only city in China with a total GDP of more than 3 trillion yuan. It is also the only city in China where lawyers gaina total income of more than 20 billion yuan.
In 2018, the Shanghai Government has proposed a new plan of the “Five Centers” and launched fourbrands including “Shanghai Service”, “Shanghai Manufacturing”, “Shanghai Shopping” and “Shanghai Culture”, in order to improve the business environment in Shanghai. Shanghai, together with Zhejiang, Jiangsu and Anhui, formulated the strategy of integral development. In addition, Shanghai is aiming at enhancing its core competitiveness, embracing the world and the future. Also,Shanghai has adopted the “Enlarging Opening Up Policy 100”. The adoption of a series of policies has further clarified the development strategy of Shanghai.
Shanghai is not only strengthening its function of resource integration, but also continuously improving its service category and energy level, basing its development strategy on a global level.
The development of Shanghai lawyers in the past decade is remarkable, both in terms of the speed and the quality of development.
From 2008 to 2017, the number of Shanghai law firms has increased from 889 to 1,537, and the number of Qualified Lawyers has increased from 10,071 to 21,743. The overall revenue has increased from 525 million pounds to 2.315 billion pounds.
Based on the annual growth rate, we’ve made a prediction of the development of the Shanghai legal industry in the next 5-10 years. We can see that it is a market with incredible potential in the future.
III.The Internationalization of Chinese Law Firms and The Emphasis on Foreign-related Legal Services and Lawyers.
London has the best infrastructure and talents in the financial and legal services industry, and London offers fabulous investment opportunities to Chinese companies.
In recent years, there has been a wave of entering the London legal market in Chinese law firms. The London offices of KWM, Zhong Lun and Llinks have been established.
Following the strategic cooperation with Bird&Bird at the end of 2017, the London office of Allbright Law Firm has been established in March 2018.
The internationalization of Chinese law firms and competition with foreign law firms is one of the trends in China’s legal market.
At the same time, China is paying more and more attention to foreign-related legal services and lawyers. Many directors and managers of Chinese big law firms have made the point that the ability to provide cross-border legal services will become the core competitiveness of a law firm in the future.
On August 31, 2018, the Ministry of Justice of China announced the “List of 1000+ Outstanding Foreign-related Lawyers in China”. According to statistics, among thousands of lawyers enlisted, lawyers in the following three major areas are the most: cross-border investment, civil commercial litigation and arbitration,and international trade.
I. Offices of foreign law firms in China: The UK and US offices are the main stream, and the number of offices in Shanghai exceeds that of Beijing.
Based on the Announcement No. 175 issued by the Ministry of Justice in September 2017 and the statistics of the 223 foreign law firm’s offices in China in 2016, we have made the following two charts. There are three characteristics that are worth-noting:
First,among the foreign law firms’ offices in China, those account for the largest proportion are the US, the UK, Japan, Germany and France, of which the UK and US offices account for 62.3% together.
Second,Beijing and Shanghai have a total of 211 foreign law firm offices.Specifically, there are 85 offices in Beijing and 126 in Shanghai, accounting for 94.6% of the 223 foreign law firms in China.
The nationality of these foreign law firms is diversified. For instance, the Noronha Advogados Law Firm from Brazil, the De Wolf Law Firm from Belgium and the Apple by Law Firm from Mauritius all established their China offices in Shanghai.
Finally, the number of foreign offices in Shanghai has significantly exceeded that of Beijing. Beijing and Shanghai are the most developed cities in China’s legal industry. The number of lawyers, the number of law firms, the total income of lawyers, and the income per capita all exceed other cities in China.
II.Ten in One: China’s Developing ” Business Environment for Law Firm “
In the World Bank’s “2018 Business Environment Report”, the analysis of China is based on the indicator value of Shanghai and Beijing. Nowadays, China is striving to improve its business environment. The reason why China’s legal market is able to keep growing rapidly is not only the booming economy, but also the improved business environment.
We believe that China has built a good “business environment” for the development of law firms in the following ten ways.
1.Clear goals and national strategy.
The increasingly diverse and demanding needs of legal service have brought about unprecedented opportunities for law firms.
2.Good legal environment and sophisticated law enforcement departments have brought legal protection to enterprises.
In the World Bank’s Doing Business Report, China ranks fifth in the world in terms of “Enforcing Contracts”. Sub-indicators such as judicial efficiency, judicial costs, and judicial procedures are included under the “Enforcing Contracts”. In recent years, the achievements of China’s judicial reform are obvious to all.
3.Full and strong support from Chinese government for legal industry.
For example, at the end of August 2018, the Ministry of Justice of China announced the “List of 1000+ Outstanding Foreign-related Lawyers in China”. It has become one of the key tasks of the Ministry of Justice and the judicial bureaus in recent years to support these lawyers.
4.China has formed strong business culture and legal culture over the past 40 years.
Chinese residents and enterprises have strong legal awareness. Seeking dispute solutions by law is the choice of most Chinese residents and businesses.
5.China’s top law schools provide the legal industry with a large number of talents.
6.A benign market competition environment in the Chinese legal market.Chinese law firms all consider professionalism and quality of their services as the fundamental requirements for their future development.
7.The Chinese legal market is an inclusive and open place for cooperation of Chinese and foreign law firms.Take the Shanghai Free Trade Zone as an example. Now there are five allied law firms in the Free Trade Zone, including Fenxun & Backer McKenzie, Wintell& Holman Fenwick Willan, Fujian Fidelity & Hogan Lovells, Guantao LawFirm & Ashurst, Zhao Sheng & Linklaters.
8.Lawyers’ rights can be protected in a good practice environment.
9. Construction of infrastructure.
The optimization of the industry management structure, the construction of aunified information platform, the complete training system for new lawyers, the guidelines for the practice, the direct communication platform and the perfect welfare system have become the focus of work in all Chinese bar associations.
10. Ensure the quality of legal service with strict norms and disciplines.
We believe that these ten factors — the market environment, the rule of law,policy support, legal culture, the reserve of talents, competitive environment,openness of the market, the practice environment, industry infrastructure and industry discipline — will ensure the sustainable growth of China’s legal market in the future.
III. Growth and Potential of Chinese legal professionin the future 5-10 years
十年时间，中国律所从 1.45 万家增长至 2.8 万家，增长了约一倍；中国执业律师从 15.67 万人增长至 36.5 万人，增幅达到了132.93%；其整体创收更是从 300 亿元人民币（约合 34.19 亿英镑）增长至 1000 亿元人民币（约合 113.96 亿英镑），增长233%。
In the past ten years,the number of Chinese law firms has doubled from 14,500 to 28,000. The number of Qualified Lawyers in China has increased from 156,700 to 365,000, with a growth rate of 132.93%. The overall revenue has grown from 3.419 billion pounds to 11.396 billion pounds, with a growth rate of 233%.
If we follow the current annual growth rate, we can make the following predictions:
By 2022, there will be presumably 39,000 law firms and 556,000 qualified lawyers in China, with an estimated total revenue of 20.809 billion pounds.
By 2027, there will be presumably 54,000 law firms and 848,000 qualified lawyers in China, with an estimated total revenue of 38.006 billion pounds.
Today, here we have managers of Chinese top law firms and representatives from “Magic Circle” and “Silver Circle”. As the cooperation between China and the UK is an irresistible trend, we will surely see more and more interactions between lawyers from both countries.
For the whole legal industry, China is an open, fast-growing and vibrant market with numerous opportunities and possibilities.
With the current development momentum, I believe China will become one of the world’s largest legal markets in the future.