Page 384 - 2018 White Paper on the Business Environment in China
P. 384
8 White Paper on the Business Environment in China
According to “The Lawyer China Elite 2015” survey, Management Consulting
all but one of the thirty largest Chinese law firms
posted revenue growth in that year with many enjoying “The consulting industry continues to be a dynamic,
substantial gains. This uptick is particularly noteworthy vibrant market, and I think the outlook is very promising,”
given China’s stock market crash and slow economic says Carol Liao, Senior Partner and Managing Director of
growth. Though the gross revenue and profit per lawyer Greater China for Boston Consulting Group (BCG). There
figures pale compared to many of the top AmLaw is evidence to back up Liao’s statement. The market
and Magic Circle firms, their skyrocketing trajectory research firm Source Global Research estimated that
suggests that these firms are enjoying a white-hot China’s consulting market grew 7 percent over 2015,
market fueled, in no small measure, by the international reaching a total market value of $4 billion. Despite
stampede seeking to tap into the vast Chinese market. differences in definitions and data sets (for instance as
But it is not all inbound traffic for these Chinese firms. to which companies are categorized as management
Chinese firms have quietly emerged as players in the consultants), most reports reflect an industry that is
fast-growing Asian legal market and beyond. Consider on the upswing, but from the same sources, it is also
that Big Four giant Ernst&Young has recently acquired clear that the consulting industry in China is still in
a Chinese law firm and is now engaging in the practice a nascent phase compared to more mature Western
of law there. Within the past few years, some of the markets, especially that of the United States. There is
world’s largest firms have struck deals to tie-up with also the question of consulting’s geographic reach in
large Chinese firms, while other firms are pursuing other China compared with developed markets, with most
international strategies. Baker & McKenzie entered into consulting firms here concentrated in the economically
a Joint Operation Arrangement with FenXun, Dentons is prosperous eastern regions and first-tier cities. According
set to merge with Dacheng, and King & Wood Mallesons to Chinese brokerage Founder Securities, the consulting
(an amalgam of Chinese, Australian, and U.K.-based industry accounts for only 0.18 percent of GDP in China
firms) has now established its global headquarters compared to 1.2 percent of GDP in the United States.
in Hong Kong. The Chinese arms of these new global While China’s economic growth is slowing to its weakest
Goliaths will not simply facilitate legal work in China for in 25 years, the consulting industry is unlikely to follow
their foreign partners but will be increasingly involved suit. An economy in transition facing a range of issues
in representing outbound foreign investment by their such as industrial overcapacity, heavy debt burdens,
domestic clients. While attention has been focused on weak export numbers, a cooling property market and
Chinese firms’ recent tie-ups with Western firms, Zhong rising labor costs all contribute to uncertainty in the
Lun, China’s third largest—and second most profitable business environment. Some companies are responding
firm on a per lawyer basis—has elected to pursue with budget tightening, but others are seeking “brains-
internationalism on its own. The firm is taking a more for-hire” to help them navigate through difficult times.
autonomous, deliberate approach to join the global Consulting companies that position themselves
ranks by building up its domestic brand, leveraging it effectively can gain an advantage (Tse).
across the Asian market, and later, developing its own
“best friends” global network (Cohen). The management consulting industry was established
in China more than two decades ago. However, the
Of course, this demand for improved legal services industry is still on a small scale compared with its
is also prominent in the growing super-power that is counterparts worldwide. Although there are many
China. The formation of the Legal Service Centre for traditional Chinese theories on management philosophy,
Foreign Individuals (LSCFI), which has been set up to they have not generally been applied to business.
meet the growing demand for legal services for expats, Instead, marketing—not business management—was
demonstrates the rising demand for foreign affairs. what initially prompted the establishment of consulting
Additionally, Chinese lawyers are now required to firms in China. Once companies realized that large
have not just extensive knowledge of legal affairs but profits could be generated through effective marketing
also to specialize in a foreign language and be able to and management consulting service, they began to
communicate effectively with clients from a range of actively absorb marketing and management theories
cultural backgrounds (Translatemedia). from the West. The management consulting industry is
highly labor-intensive. Wages within this industry are
high. As the industry has developed strongly in the past
384
According to “The Lawyer China Elite 2015” survey, Management Consulting
all but one of the thirty largest Chinese law firms
posted revenue growth in that year with many enjoying “The consulting industry continues to be a dynamic,
substantial gains. This uptick is particularly noteworthy vibrant market, and I think the outlook is very promising,”
given China’s stock market crash and slow economic says Carol Liao, Senior Partner and Managing Director of
growth. Though the gross revenue and profit per lawyer Greater China for Boston Consulting Group (BCG). There
figures pale compared to many of the top AmLaw is evidence to back up Liao’s statement. The market
and Magic Circle firms, their skyrocketing trajectory research firm Source Global Research estimated that
suggests that these firms are enjoying a white-hot China’s consulting market grew 7 percent over 2015,
market fueled, in no small measure, by the international reaching a total market value of $4 billion. Despite
stampede seeking to tap into the vast Chinese market. differences in definitions and data sets (for instance as
But it is not all inbound traffic for these Chinese firms. to which companies are categorized as management
Chinese firms have quietly emerged as players in the consultants), most reports reflect an industry that is
fast-growing Asian legal market and beyond. Consider on the upswing, but from the same sources, it is also
that Big Four giant Ernst&Young has recently acquired clear that the consulting industry in China is still in
a Chinese law firm and is now engaging in the practice a nascent phase compared to more mature Western
of law there. Within the past few years, some of the markets, especially that of the United States. There is
world’s largest firms have struck deals to tie-up with also the question of consulting’s geographic reach in
large Chinese firms, while other firms are pursuing other China compared with developed markets, with most
international strategies. Baker & McKenzie entered into consulting firms here concentrated in the economically
a Joint Operation Arrangement with FenXun, Dentons is prosperous eastern regions and first-tier cities. According
set to merge with Dacheng, and King & Wood Mallesons to Chinese brokerage Founder Securities, the consulting
(an amalgam of Chinese, Australian, and U.K.-based industry accounts for only 0.18 percent of GDP in China
firms) has now established its global headquarters compared to 1.2 percent of GDP in the United States.
in Hong Kong. The Chinese arms of these new global While China’s economic growth is slowing to its weakest
Goliaths will not simply facilitate legal work in China for in 25 years, the consulting industry is unlikely to follow
their foreign partners but will be increasingly involved suit. An economy in transition facing a range of issues
in representing outbound foreign investment by their such as industrial overcapacity, heavy debt burdens,
domestic clients. While attention has been focused on weak export numbers, a cooling property market and
Chinese firms’ recent tie-ups with Western firms, Zhong rising labor costs all contribute to uncertainty in the
Lun, China’s third largest—and second most profitable business environment. Some companies are responding
firm on a per lawyer basis—has elected to pursue with budget tightening, but others are seeking “brains-
internationalism on its own. The firm is taking a more for-hire” to help them navigate through difficult times.
autonomous, deliberate approach to join the global Consulting companies that position themselves
ranks by building up its domestic brand, leveraging it effectively can gain an advantage (Tse).
across the Asian market, and later, developing its own
“best friends” global network (Cohen). The management consulting industry was established
in China more than two decades ago. However, the
Of course, this demand for improved legal services industry is still on a small scale compared with its
is also prominent in the growing super-power that is counterparts worldwide. Although there are many
China. The formation of the Legal Service Centre for traditional Chinese theories on management philosophy,
Foreign Individuals (LSCFI), which has been set up to they have not generally been applied to business.
meet the growing demand for legal services for expats, Instead, marketing—not business management—was
demonstrates the rising demand for foreign affairs. what initially prompted the establishment of consulting
Additionally, Chinese lawyers are now required to firms in China. Once companies realized that large
have not just extensive knowledge of legal affairs but profits could be generated through effective marketing
also to specialize in a foreign language and be able to and management consulting service, they began to
communicate effectively with clients from a range of actively absorb marketing and management theories
cultural backgrounds (Translatemedia). from the West. The management consulting industry is
highly labor-intensive. Wages within this industry are
high. As the industry has developed strongly in the past
384
