One noticeable by-product of Greater China’s tepid transactional landscape in the past year has been in a slowdown in the lateral hires of senior corporate lawyers in the region, with the trend set to continue in 2023 as economists expect China’s growth this year to be almost the weakest in decades.
Tightened COVID lockdowns have muted capital markets activities and sapped legal demand, squeezing law firms’ appetite for big-ticket lateral hires. Levana Huang, Shanghai-based regional director at Kingfisher Recruitment Group, has observed hirings at firms’ corporate transaction departments being quiet so far this year. The recruitment drought first ensued at the height of China’s spring outbreak that kept commercial capital Shanghai shut off for two months.
“As the pandemic affected China greatly in the second quarter of 2022, the demand for corporate transaction lawyers begin to dwindle,” notes Huang.
“While A-share IPOs doubled in the first half of 2021, compared to the first half of 2020, and continues to do well in Q3/4, the Hong Kong market’s performance has been slow. At the same time, Chinese companies are facing regulatory hurdles to go public in the U.S.,” she adds.
With softened demands and rising expenses throttling law firms’ profitability, Huang says there has been multiple stealth layoffs within international firms this year.
That’s not to say, however, that has been no corporate movement at the top end. Huang stresses “partners with portable business” are highly coveted as firms rush to secure a profitable path to expediate turnarounds.
“Due to worsening pandemic dynamics that we have witnessed this year, very few firms are willing to consider senior hires of counsels or partners that are only starting to build a book,” she notes.
A seemingly paradoxical trend is that as the economic outlook sours, there has the intensifying one-upmanship among big international outfits to keep their rainmakers, according to Lena Xue, legal team manager at recruitment services agency Hays China.
“Some U.S. firms have been paying U.S. rates to top fee-earners as one of the incentive plans. Even some Magic Circle firms are trying to match that compensation level to attract top performers,” says Xue. “International mobility and the opportunity of training at headquarters are still advantages that international firms have to retain talents.”
However, Xue says that more broadly, firms are discouraged by the economic shakeout, and will tighten their belts in the next year, holding off costly expansion. “When it comes to senior hiring, the priority will be internal promotion for maintaining key talents as well as saving costs,” she adds.
While corporate work might have been sluggish, Huang has spotlighted dispute resolution as a robust practice area throughout the downturn, with litigators getting an opportunity to shine.
Hannah Lau, principal consultant at Kingfisher in Hong Kong, adds that she has seen a surge of interest in corporate restructuring and insolvency expertise in a market teetering from strained M&A and IPO transactions from mainland China.
“During the entire 2022, the restructuring and insolvency practice has remained active in Hong Kong, with special situations lawyers particularly in great demand,” says Lau.
In addition, “From Q2 onwards, international law firms have started to look for mid-to-senior level lawyers, mainly in structured finance and derivatives, investment funds and debt capital markets,” Lau adds.
Looking ahead, Huang anticipates more downward pressure on demands for senior corporate lawyers next year. But specialists who are able to adapt and upskill in lockstep with evolving market trends are likely to be insulated from persistent headwinds.
“In 2023, senior lawyers that are able to anchor themselves in trending sectors such as renewable energy (infrastructure and the technology), IoT, semiconductors, telecommunications, will have a better chance of being versatile,” says Huang.
“The demand for patent lawyers should also remain consistent. Statistics show a year-on-year increase in the number of intellectual property (IP) agencies and practitioners in China,” she adds.
Although the world’s second-largest economy is headed for an anaemic final quarter with no signs of a robust revival, recruiters are confident that lateral hirings in certain practice areas will go against the tides.
“Overall, we are detecting active hiring being made in dispute resolution, labour and employment, regulatory and compliance, insolvency and restructuring, banking and finance, and IP and patents,” says Huang.
Xue adds that as organisations look to implement policies that comply with government-led carbon neutrality schemes, “ESG functions are becoming more commonplace within corporate legal teams, especially in the manufacturing and automotive industries.”
In Hong Kong, growing needs for privacy law expertise arising from relevant legislative development will also play a part in shaping firms’ operational and recruitment strategies, according to Lau, who cites preliminary proposals from the Law Reform Commission in this regard.