Shanghai 2010: Expo-nential growth

Recent visitors to Shanghai will have noticed the growing army of blue soldiers: thousands of haibos, the blue mascots shaped like the Chinese character for ‘person’ (人), standing on every intersection of the city. Large construction and renovation projects have dominated much of the city as preparations for May’s Shanghai Expo 2010 set into full swing.

The expo, themed “Better City, Better Life”, is expected to attract between 70 and 80 million visitors and will be a significant event for Shanghai. Aside from the opportunities brought by the World Fair, the city remains a key focus for international and domestic law firms.

Shanghai’s 2009 GDP grew by 8%, equivalent to US$281bn, and exceeded the size of Hong Kong’s economy for the first time in decades. So at the tail-end of the crisis, law firms here have much to look forward to.

Inter-Asia deal pipeline

While dealflows between China, Europe and the US are still dominant, one of the most notable changes in the legal market is China’s increasing business with neighbouring countries.

In 2009, many intra-Asia deals were completed, benefiting both domestic firms and international firms with a presence in Shanghai. Law firms such as Shimin Law Offices have noted an increase in intra-Asia work, especially related to Japan. “We’ve always worked mostly on Japan matters when it comes to Sino-foreign transactions, but we’ve recently received an increased number of enquiries regarding Japanese businesses,” says Qi Bin, partner at Shimin. “It could be because Chinese companies have increased their understanding of Asian business cultures and legal structures over the past few years, and now that they are more familiar with those environments they are also more comfortable in operating there,” he says.

Chen & Co has also profited from intra-Asia deals. “There is a new element of heightened interest in M&A. In the last two months we have handled three cases: one was an acquisition of a domestic retail chain by the Lotte Group in Korea,” says Seth Libby, of counsel at the firm.

While many international firms have been hit hard during the financial crisis, others have successfully weathered the storm by riding the intra-Asia tide. A notable amount of deals are happening with the Middle East, Singapore, Korea and Japan.

These trends are highly profitable for firms like WongPartnership, one of several Singapore firms with offices in Shanghai. “The most significant trend obvious to us is China’s growing interest in the Middle East, South- East Asia and India,” says Gerry Gan, the Shanghai-based partner and head of the China practice at WongPartnership. The firm recently completed the US$201m sale of Tianchen Rose plaza, situated in Shanghai, to AM Alpha (Singapore), an investment advisory services company.

“We see ourselves as being very relevant in Sino-Asian deals. We also see more inquiries from Chinese companies about the Middle East. Tapping into this region, we are growing our client base and hope to be able to continue to leverage that trend with our office desks and partners in Malaysia, India and the Middle East,” Gan adds.

Another firm also enjoying mandates from the Chinese interest in neighbouring countries is Japanese firm Mori Hamada. It acted for Asahi Beer in its US$688m acquisition of Tsingtao Beer from Anheuser-Busch InBev.

However, in working with Chinese clients the Japanese firm has adopted a significant change in perspective. “We’ve traditionally represented Japanese corporations on their share sales to Chinese corporations but now we hope to switch sides to avoid conflicts of interest,” said Yoshi Iteya, partner at Mori Hamada. “We now choose to advise Chinese clients instead.”

Notably, Mori Hamada shares a close working relationship with Shanghai’s Guoce Law Firm, as part of its strategy to obtain more Chinese referrals.

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