Should You Engage Chinese Professional Service Firms?

Strengths of Chinese Service Firms

A number of Chinese professional service firms employ professionals who have previously worked at Western firms. At top Chinese firms, many partners or directors have worked in Western-owned firms for significant portions of their careers. A number of these people have even worked overseas in the West. Similarly, many of them have graduate (and increasingly undergraduate as well) degrees from the U.S., Europe, or Australia.

Chinese firms tend to have experts in a broader range of China practice areas than Western firms do. For example, few foreign law firms in China have experts in Chinese taxation, Chinese employment law, or Chinese litigation (among other areas). However, large Chinese law firms usually have all of these specialists under one roof. In general, foreign-owned service firms tend to have fewer employees in China than their Chinese counterparts do. It is therefore difficult for them to have experts in niche practice areas.

Chinese professional service firms are typically better able to take advantage of relationships with local Chinese officials. Having relationships with the right officials can speed up processes, and allow you to obtain better information. Firms that have offices in your investment destination are going to understand the lay of the land better than firms that do not have local presences. Foreign firms generally concentrate in Beijing and Shanghai. Chinese firms are likely to have wider office networks in second- and third-tier cities, and are more likely to cooperate with local firms in places in which they do not have offices.

Things To Be Aware Of

One weakness of many Chinese firms is in communicating with clients. One example that I have noticed is that junior attorneys in Chinese firms may have a solid understanding of the law; but, because they have not been in a foreign firm environment, they occasionally email conclusions to the clients, without providing analysis or methodology.

Chinese firms vary widely in quality. To be sure, there are many Chinese service firms that do not have the sophistication to deal with decent-sized foreign investment. Quite a few Chinese firms do not truly understand the needs of foreign investors. However, foreign investors face a similar issue at foreign-owned service firms in China. At foreign firms, practice standards are not uniform among individual professionals. Regardless of whether you engage a foreign or Chinese firm, you must be comfortable with the skills of the individuals working on your behalf.

Foreign firms are often better suited for complex, cross-border transactions. Transactions that significantly involve multiple countries call for global networks of offices and experts. The ability for teams around the globe to hand off projects to one another at the close of their respective business days is also an advantage that foreign firms have.

Engaging Service Firms Early in the Entry Process

Many foreign investors begin engaging Chinese professional service firms after they have spent some time in the China market. Anecdotally, it is not unusual for these foreign investors to feel that they should have looked at Chinese firms when they initially entered China. They could have saved money possibly without sacrificing quality. As I wrote, regardless of which model you use, you should closely evaluate the individuals involved in your transaction.

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How to choose a law firm in China

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