The legal market in the Yangtze River Delta (YRD) region has undergone significant change in the past year. While last year many MNCs ceased investment interests, China’s domestic companies also saw opportunities to venture forward. 2009 also witnessed the birth of many new firms and branch offices in the region, as it remains crucial to the development of many firms.

Firms in the leading cities are recognising the need to make drastic changes to stay ahead of the game. Some have ventured onto foreign ground through undertaking new legal practice areas. Others are working on their internal structures to gear up their professional standards.  With the re-entrance of international conglomerates and the continued international aspirations of many domestic companies, the YRD region is beginning to offer up a new class of wealth for lawyers and law firms.

Zhejiang

Zhejiang - explosive growth
Economic Indicators	2008		Jan-Nov 2009
	Value	Growth (%, y-o-y)	Value	Growth (%, y-o-y)
GDP (RMBbn)	2,148.7	10.1 ¹	1,582.8	7.7 ¹
Fixed-assets investment (RMBbn)	932.3	10.7	713.2	14.3
Retail sales (RMBbn)	744.1	19.8	775.5	15.3
Exports (US$bn)	154.3	20.3	119.4	-16.1
- By FIEs (US$bn)	54.2	14.9	40.2	-19.9
Imports (US$bn)	56.9	17.0	49.0	-8.1
- By FIEs (US$bn)	29.3	22.9	21.9	-20.5
Utilised FDI (US$bn)	10.1	-2.8	7.8	-13.7

Cities	GDP (RMBbn)	Per capita GDP (RMB)	Gross industrial output (RMBbn)	Retail sales (RMBbn)	Exports (US$bn)
Hangzhou (杭州)	478.1	60,414	933.2	155.8	33.6
Ningbo (宁波)	396.4	56,771	853.8	123.8	46.3

ZHEJIANG LEGAL MARKET  - HIGHLIGHTS: • Hangzhou’s legal community is forecasting the emergence of demand over a  broader spectrum and in higher-end practice areas, including capital markets, insurance and real estate • Zhejiang launched the region’s first legal services centre in Hangzhou in 2009, boosting confidence in the market outlook for 2010 • More domestic firms from first-tier cities are entering the Hangzhou market • Ningbo firms are also diversifying into other areas of practice including insurance and capital markets • More Ningbo companies are venturing overseas after the financial slowdown, foreshadowing a healthy increase in domestic legal matters • Ningbo port is planning a US$1.0bn dual-listing in Shanghai later this year

Hangzhou 

Hangzhou firms are gearing up for the emergence of new practice areas in 2010. More specifically, lawyers foresee the rise of legal demand in niche sectors and are prepping their teams beyond the traditional work areas. Brighteous, with 19 partners focusing on litigation matters, is one of those firms. It saw revenue growth of 20% over 2009 and has flourished with mandates from over 200 long-term clients, including Youngor, Guangsha Construction and Zhejiang Daily.

But the firm has greater ambitions.  “The GFC brought along an increase in litigation matters, due to disputes between international and domestic companies. In order to move forward we need to look at what 2010 has to offer, and I think it’s time to take on new practice areas,” said the firm’s partner Cui Haiyan.

“We want to balance the work ratio of our non-litigation work to that of our litigation matters” Cui Haiyan, Brighteous

She left Xingyun Law Firm in 2006 to set up Brighteous, having identified a gap in the market for high-end specialist legal services. “We want to balance the work ratio of our non-litigation work to that of our litigation matters. At this stage, we are looking to extend (but not limited to) PE and capital markets,” added Cui.

More firms are also recognising Hangzhou’s market potential. The city saw five new law firms flock to the legal community, including DeHeng Law Offices which hired AllBright lawyer Wu Lianming to head up its office. The firm focuses on three practice areas – capital markets, real estate and M&A – and currently houses five partners and 10 lawyers. “Hangzhou offers great business opportunities for DeHeng Law Offices, especially with the rising demand for capital markets legal services and the growing enterprise base,” Wu said.

The hopes held for Hangzhou’s business horizon legitimised when it launched the region’s first legal services centre in Xiaoshan, the most economically developed administrative district of Hangzhou. Founded by the Hangzhou Bureau of Justice in August last year, the centre is intended to facilitate the provision of legal services to businesses and provide reliable information so they can choose the appropriate legal services provider.

The centre utilises more than 120 registered lawyers from 27 firms, including Rosen, Havins & Gu from the US, Woo Kwan Lee & Lo and Robertsons from Hong Kong. The other firms are leading local firms, such as Zhong Lun, Grandall and JT&N. With a formalised legal service directive, the hub, home to many high-tech and innovative companies like Alibaba Group and Wahaha Group, promises those lawyers practicing in the region an almost certain ability to expand their firms’ business.

For example, L&H Law Firm’s success in 2009 reflects this opportunity. The firm is one of Hangzhou’s leaders, serving mostly medium-to-large companies. It has enjoyed a 30% increase in mandates –albeit having taken a blow to its debt restructuring practice. “Post GFC, our clients are placing more importance on being able to withstand risks, they also have stricter requests and higher demand for quality legal services,” said Zheng Jindu, a partner at the firm.

“This mindset brings about more work in due diligence since our clients (Fortune 500 companies) require stringent regulations,” L&H is focusing on capital markets, real estate, and the insurance sectors this year. “In 2010, we want to push our deal value up to US$90m, from US$80m in the previous year. We also hope to attract more business from SOEs,” said Zheng.

Ningbo
Ningbo has one of the largest ports in China and offers great opportunities for many shipping firms in the region. Grandall Legal Group affirmed Ningbo’s vitality when the firm opened its tenth office last year in the important port city. Opening in Ningbo gives Grandall three offices in the YRD region, with Shanghai and Hangzhou being the other two. Managed by Li Daofeng, who served as a judge in Ningbo’s Maritime Court, the Ningbo office was established to provide advice regarding shipping, property and insurance matters. The firm also offers general corporate and international trade legal support.

However, Ningbo companies have also been venturing into regions outside of Zhejiang. “This globalising trend continues to be very promising. Given that Ningbo has the second- largest dock in China, the region brings many international investors and these major companies demand a very niche area of legal service,” said Li.

Grandall’s Ningbo office has surpassed the Shanghai office for networking and is building its maritime practice over the next three years. It will also be responsible for allocating resources for offices in the YRD region and building up the development, training and internal structure for its YRD counterparts.

In Ningbo, the demand for legal services has also increased. “The GFC caused a lot of disputes between and within businesses. International companies in Ningbo and its domestic associates have all turned to legal advisors to resolve their issues,” Li added.

With top logistics and shipping companies such as Maersk, MSC, and Lloyd Triestino operating in the region, the success of Ningbo’s shipping sector has propelled the city beyond its own expectations. For example, the American Bureau of Shipping launched a Ningbo office in April last year; and an increase in the entry of internationally recognised companies has helped the city’s shipbuilding sector expand in an overseas market.

“In the past no one was really interested in listing criteria, but you will now see companies taking the initiative to ask questions like what are the differences between listing in Ningbo and Hong Kong? [Listing] has matured significantly and has now become a springboard to success for Ningbo firms” Li Daofeng, Grandall Legal Group

Domestically, state-owned Ningbo Port Group Ltd, the world’s eighth-largest port by container throughput, plans to launch a dual listing in the first half of 2010. Shanghai International Port (Group), the largest port operator in mainland China by throughput, will subscribe to some ‘H’ shares of Ningbo Port. In 2008, Ningbo Port’s cargo throughput reached 362 million tons, remaining the second-largest in mainland China.

Apart from shipping and maritime business, Grandall also recently launched its capital markets practice and beefed up its insurance sector. “Capital markets is [a sector] doing well above our expectations. We only recently launched [the] sector and [we] are already dealing with current IPOs and listings. In the past no one was really interested in listing criteria, but you will now see companies taking the initiative to ask questions like what are the differences between listing in Ningbo and Hong Kong?” said Li.

“It has matured significantly and has now become a springboard to success for Ningbo firms. This is good news also because very often, apart from listing, these clients also require other legal advice like restructuring.”

In the insurance sector, the firm gained clients like Chinese insurance conglomerates Pingan and Taiping last year. Grandall is confident about its prospects and plans to recruit 20 lawyers during this year to boost its branch resources. The firm also wants to expand into a further four practice areas later this year.

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