Law firm competition heats up in China

International law firms have been hit by a double blow in the last two to three years: a slowdown in inbound investment has pushed them to rely on outbound work. At the same time, domestic firms have increased their share of inbound work, with foreign companies turning to them instead when they enter China. The rising status of top local firms even challenges the international firms in outbound capabilities and deal volume.

According to a KPMG report on investment in China in 2013, inbound investment for the year totalled US$117.6 billion (Rmb731.6 billion), up by 5.25% from the previous year. While total outbound direct investment was less at US$90.17 billion (Rmb560.9 billion), the annual increase of 16.8% confirmed that the growth rate of outbound investment continues to outpace that of inbound. A Capital predicts that outbound investment will equal inbound within three years.

“If you look at the dynamic of outbound vs inbound deals, more and more inbound work goes to local law firms with less going to international firms,” said Jian Fang of Linklaters.