A senior Herbert Smith partner in Hong Kong recently pointed out that in the past decade most of the corporate work international firms have done in Hong Kong has had a China element in one way or other. Few would disagree.

Of more interest, thought, is that today many PRC firms are using Hong Kong in the opposite direction. In the past few years, they have advised their clients on an increasing number of transactions that involve a Hong Kong element. And Hong Kong has become an important bridge linking them with international markets.

The most recent example is the opening of Beijing Guantao's Hong Kong office, the firm's first international base. The firm has been involved in a number of IPOs and listings of PRC companies overseas and a growing number of outbound investments by Chinese clients.

"While Hong Kong remains an important gateway for foreign investment into China, its role as China's bridge to the world has been increasing significantly. Chinese companies increasingly use Hong Kong as a springboard to go overseas," said Yan Pengpeng, partner in charge of Guantao Hong Kong office.

Guantao's arrival has pushed the total number of PRC firms with a Hong Kong branch office to 10. Half of them are operating in association with a local Hong Kong firm, while the rest have formed formal or non-formal alliances with local Hong Kong firms.

Two further reasons that Hong Kong is considered to be a strategic location are that it provides a common ground for law firms from different jurisdictions to closely cooperate with each other; and it offers an attractive international talent pool for PRC firms.

Before opening its Hong Kong office, Guantao had formed an alliance with local Hong Kong firm Jackson Woo & Associates (JWA). Last November, when UK firm Ashurst was opening its Hong Kong office and forging a formal association with JWA, Guantao was also entering into a non-exclusive alliance with Ashurst.

Yan revealed that the Hong Kong office will be a platform for strengthening the firm's alliance with Ashurst and Jackson Woo & Associates. "It provides a common ground enabling the three firms to collaborate closely and share resources with each other for the clients' benefit," said Yan.

Currently, all PRC firms are registered in Hong Kong as foreign law firms, a status which prohibits them from practising in that jurisdiction. However, a PRC or foreign law firm registered in Hong Kong may elect to convert and change its status in order to be able to practise as a Hong Kong law firm. To do this, it needs to comply with all the same conditions as a local practice, including exclusively appointing Hong Kong solicitors as partners in a locally compliant law firm partnership.

Some industry observers anticipate that the integration of King & Wood, the first PRC firm to establish an operation in Hong Kong, with its Hong Kong associate firm Arculli Fong & Ng will be completed this year - the final step in a process started in early 2006.

In anticipation of the intended integration, King & Wood has strengthened its Hong Kong offering by appointing Serge Fafalen, the Swiss founder and managing partner of a Hong Kong registered foreign firm SG Fafalen & Co, as a partner in its Hong Kong office. "PRC laws are following their clients everywhere in the world and expanding to meet client needs," said Fafalen.

Shanghai-headquartered Duan & Duan is another PRC firm with ambitions to gain a foothold in Hong Kong's legal market. Even before its Hong Kong branch was set up in September 2006, 30% of its annual revenue was generated by advising on Hong Kong-related transactions and investments.

Since the establishment of its Hong Kong office, the firm has experienced an increase in the instructions received from both inbound and outbound clients. As part of its long-term plans, it has formed a strategic alliance with Hong Kong local firm Chan J & Lai and will be converting its Hong Kong office to a local practice after it satisfies regulatory requirements. Thereafter, it will hire local lawyers and partners and advise on Hong Kong law, aiming to increase the contribution of total revenue of its Hong Kong-related practice from the current 30% to over 50%.

"In the next 10 years, I hope to see the main role of our Hong Kong office as assisting Chinese clients to invest into Hong Kong and set up companies in Hong Kong. Chinese clients are increasingly regarding Hong Kong as a gateway to enable them to invest globally," said Gong Xiaohang, the chief director of Duan & Duan, who now divides his time between Hong Kong and Shanghai.

However, not all PRC firms share the Hong Kong ambitions of Duan & Duan and King & Wood. Most are content to have a presence in Hong Kong that plays more of a liaison and marketing role for the mainland offices. "We don't want to develop our Hong Kong set-up into a full-blown office. We don't plan to advise on Hong Kong and international law in cross-border transactions, and don't intend to compete with well-established players in Hong Kong," said Kirk Tong, partner of Jun He, for example.

Any apparent lack of Hong Kong ambition aside, firms as sophisticated as Jun He will doubtless have very solid plans in place for expanding outbound lines of fee income.

NEXT: PRC firms expand internationally under CEPA

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