A new study by the University o California at Berkeley has determined what many have known for some time — law firms entering China struggle to take hold there and do not make money from their investments.
According to the study, firms typically grow to a team of 11, but manage to contribute no more than 5 percent of international turnover.
The report, “The Outpost Office: How International Law Firms Approach The China Market”, is based on data about 174 international law practices obtained from the Chinese Ministry of Justice. There are also 90 interviews with lawyers and in-house counsel. An average of seven foreign law firms a year have been closing their China offices, the majority because of mergers or bankruptcy.
“If you come in here expecting to make a lot of money, you ought to understand almost no one is making money,” one Shanghai lawyer is quoted as saying. In 2012, there were 81 U.S. firms in China, 19 UK firms, 15 from Japan, nine from Germany, seven from Australia and seven from France. There are over 19,000 Chinese law firms.
The authors of the report, Assistant Law Professor Rachel Stern and statistician Su Li, say: ‘In Chinese legal circles, it is now debatable whether any quality difference separates international law firms from the top tier of Chinese law firms.’ Source: Bloomberg
