On February 8, Asia Law Portal’s Twitter feed (@AsiaLawPortal) (managed by this author) – tweeted an announcement from international law firm Norton Rose (@NLegal_Global), that they’d added an Asia section to their Financial Services Regulation Blog. Richard Smith (RWS_01), Australia-based legal business development professional, responded to that tweet with a tweet of his own: “[Norton Rose] Blog entries make it look just like another law firm that thinks China = Asia.” Three of the firms first 5 blogposts were on China mainland and the other two on Hong Kong and Singapore respectively. A veteran of legal business development with over 18 years’ experience in the Asia-Pacific in magic circle and other leading law firms, Smith’s comment reflects a concern that too-great a focus on China by international law firms — misses the profound opportunities elsewhere in the region. And this absence of precision is common: Note recent reports that US law firm Fried Frank would leave Asia (more precisely: Shanghai and Hong Kong).
Why “China alone is not Asia” is an important distinction for foreign law firms
When foreign law firms seek to focus on the Asia-Pacific Region as an either new or current market for their services – a focus on the region ought to reflect the current realities on the ground. While greater Asia encompasses the jurisdictions reaching from the Pacific Islands to Turkey, the Asia-Pacific region more narrowly is what is understood to reflect “Asia” for foreign law firms. And that Asia-Pacific region stretches from Korea in the far north east through China and into Southeast Asia to the Pacific Islands. The region includes the fast-growing economies of Indonesia, Malaysia and Vietnam and the financial hubs of Tokyo and Singapore, to name a few. A focus on China alone, even if just in nomenclature, may serve to discount these other vital regional jurisdictions and hence render them less (or not) emphasized in an overall strategic posture for the region.
Eric Chin (@), Senior Analyst to the professions on strategy, structure, acquisitions and disposals at Australia’s Beaton Capital outlined for this article via email that: “While China is the largest economy, it is 32% of Asia Pacific’s US$17.8 trillion GDP. We see the development of Asia in a few ways:
- Rise of megacities: The Economist predicts Asia will account for over half the world’s 29 megacities this year. Each of the megacities will have its own commercial idiosyncrasy.
- Rise of geo-cultural units: Much has been written about the bamboo network, which underpins the local business tycoons’ recent expansion routes. There are other clusters of cultural groups like Indochina (Myanmar, Thailand, Laos, Vietnam, and Cambodia), Malay speaking countries (Brunei, Indonesia, Malaysia and Singapore), and Hindustani speaking countries (India and Pakistan) when connected as economic units are substantial.
- Rise of geo-economic units: The ASEAN Economic Community (AEC), once fully integrated will fuse the 10 countries’ over 600 million people into a common market.
In other words China ($7.6 billion legal industry) is not Asia, noting of course the current practice restrictions in some of the Asian countries requires localised but globally aligned strategy.”
Where a “China alone is Asia” strategy might be problematic
Chris Devonshie Ellis (@), Founding Partner, Dezan Shira & Associates Asia, outlined a very important point via email for this report that foreign law firms might miss if their Asia strategy reflects a focus on China’s mainland only: “As the Asian supply chain shifts into alternative, lower cost and frankly freer countries in Asia, an axis is emerging now to handle the growing amount of FDI that until now has been China-focused but is increasingly involved with Asia. Coupled with this is a move to internationalize the RMB, with China offering international traders amongst a plethora of currencies to settle in the Yuan. Singapore is now fast becoming the services hub for Asia; possessing a Beijing-approved RMB trading system, an internationally exchangeable currency of its own, and membership of ASEAN with its free trade agreements with both China and India. MNC’s with Asian HQ’s are increasingly looking to Singapore as the Asian hub, and to manage their Asian subsidiaries from there. The China operations, although with a large scale of local remit, now tend to report to Singapore, and not the other way around.”
Strategic precision is essential for challenging markets
Devonshire-Ellis provides an example where foreign law firms focused on China mainland might miss lucrative transnational or other opportunities with a China focus where the locus of the transaction is outside China but within Asia. The breadth and depth of the region offers a multitude of opportunities for foreign law firms. However within these opportunities comes a complex texture of jurisdictions and economies that a China-alone focus simply misses. Given recent challenges to not only foreign law firm profitability but also presence in the region, a refined strategy encompassing nimble, up-to-the-minute, detailed analysis of the region as a whole is essential for future success .