China has now become the world’s largest net importer of oil – having recently overtaken the United States in the role – according to Anthony Fensom, writing in The Diplomat this week. Indeed, China’s energy needs are so great that available global sources of energy will be insufficient to support the countries projected future economic growth – as Dan Harris wrote in China Law Blog late last year. Conversely, there will be a 45 percent increase in oil and natural gas production in North America by 2040, according to a study by Exxon cited by Fensom in The Diplomat.
While America is on a trajectory to energy independence with the option of becoming a major global energy exporter – China faces a future of higher energy needs and uncertainty about whether those needs can be met. China is already actively securing sources of energy from markets around the world – however their needs and America’s supply will almost certainly markedly increase the amount of energy-related FDI work available in Hong Kong as US-China energy engagement increases over time.
A China-US confluence of interests, with Hong Kong in the middle
As detailed in an interview with Jeremy Lam, then Executive Partner of Deacons, Hong Kong’s oldest law firm – the tiny archipelago of islands is the transshipment point for two-thirds of foreign direct investment emanating from and en-route to China. Indeed, Beijing has provided the once-British colony with its imprimatur for acting in such an intermediary capacity.
This has led as I outlined then – to increasing competition among Hong Kong firms for business related to China investment flow. The competition – and the stakes in terms of potential law firm revenues – is likely to highten as China’s thirst for energy and America’s ability to supply it — increase.
How a Hong Kong law firm can become the pre-eminent China energy intermediary
With more and more law firms vying for the work associated with Chinese outbound and inbound FDI – a Hong Kong law firm that develops and implements the following initiatives could become the pre-eminent local law firm for work related to China energy trade flow:
- Establish a China Energy Law Blog, authored from Hong Kong around issues related to the domestic Chinese energy sector and any other legal issues related to cross-border movement of funds or resources related to China’s efforts to secure energy. I’ve previously outlined the importance blogging has to the generation of law firm revenue.
- A dedicated internal business development discipline whereby you are consistently identifying all potential sources of China energy-related work. A process of actively engaging those potential clients with an aim to discussing commercial opportunities with them where your law firm may generate revenue as a result – is essential. This research would involve both the use of information available in the public domain as well as proprietary databases.
- The identification of intermediaries for US energy sector clients such as law firms, investment banks, accounting firms, sectoral management consulting firms and others. Once identified, begin the process of building relationships with these intermediaries with the aim of acting for their clients as it relates to any China energy market access they may wish to secure. Vitally, these relationships must be proactive in nature and require coordination by internal business development professionals.
- A political monitoring discipline where your firm is identifying any domestic US or Chinese political developments which may have an impact on the scope of any potential changes to China’s increasing engagement with the US on energy.
- Finally, your internal business development team must sit alongside practitioners throughout the entire process to ensure all elements of these initiatives are carried out fully. Leveraging a highly sophisticated and well trained BD staff around these initiatives would maximize your firms ability to secure a pre-eminent position among your peers as the prime conduit for China energy-related FDI.
A roadmap for success
Any Hong Kong law firm hoping to achieve pre-eminent status among those firms vying for China energy related work must ensure their internal business development staff is both capable of — and possesses the authority to — undertake all of the core initiatives I’ve listed above. A Hong Kong law firm can become head-above-the-rest in the China energy trade game. But in order to do so – you must effectively establish the mechanisms and deploy the relevant professionals necessary to achieve that goal. While no simple task – given the stakes at hand – the disciplines I’ve outlined above ought to be in place and vigorously undertaken by any firm seeking a pre-eminent market position as Hong Kong’s leading China energy FDI intermediary.