Gansu Province, Qinghai Province and Ningxia Hui Autonomous Region in northwestern China have a long history and rich resources. They are China’s “green barriers” and bases for agricultural and energy reserves. With infrastructure construction, new energy and new materials, digital economy, new agriculture and other sectors booming, this region will advance its future development that promises to be green, digitalisation and open, bringing more opportunities for the legal sector.
Although still in the third tier among all provinces in China in terms of GDP in 2021, Gansu, Qinghai, and Ningxia – collectively known as Gan-Qing-Ning – have made a big leap compared to previous years.
Gansu, the strongest among the three, exceeded 1 trillion yuan ($148 billion) in GDP for the first time last year. Ningxia achieved a GDP growth of 6.7 percent, and its capital Yinchuan breached 200 billion yuan in GDP for the first time. Although Qinghai’s economic total is still not high, its capital Xining had a dazzling report card with GDP exceeding 150 billion yuan, ranking ninth in terms of growth rate among all provincial capitals in China.
Last October, the Chinese government released the Outline of the Plan for Ecological Protection and High-quality Development in the Yellow River Basin, hailed as another major national strategy after the coordinated development of the Beijing-Tianjin-Hebei region, the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, and the integrated development of the Yangtze River Delta region.
Corresponding to the level of local economic development, none of Gansu, Qinghai and Ningxia is a major province for legal services. The number of lawyers in the three places combined only just exceeds 10,000, and the legal services industry there has long been facing the predicament of business areas being too traditional, lacking innovation of new practices, and difficulty in building up high-end business.
However, with more and more national law firms establishing presence in Gan-Qing-Ning, the service offerings of lawyers there are changing rapidly. For them, pursing relentless study amid such pressure is the key to holding onto the northwestern market.
INNOVATE TO SUCCEED
In 2007, Dentons’ Yinchuan office was formally established. According to the National Lawyer Credit Information Publicity Platform, it is the first non-local legal service institution to set up shop in Ningxia. Gao Fengjiang joined Dentons Yinchuan then and became its director in 2012, “participating in its construction and development all the way.”
“China launched the western development strategy in 2000, and the Ningxia government proposed to develop the legal services industry accordingly. Dentons was formulating and implementing the ‘1st Five-Year’ plan at that time to expand its pursuing national presence. It can be said that Ningxia’s economic policies and Dentons’ plan are made for each other.”
Gao says he was working in a small local firm at that time. “I was young and felt this was an opportunity. So I was willing to grow with the Dentons team.” That choice has now paid off: from less than 20 initially, Dentons Yinchuan has reached about 140 practicing lawyers this year.
Dentons’ Xining office was also established around 2007. In 2020, the former Dentons’ Xining office merged with Zhifan Law Firm, a local Qinghai firm. After two years of integration and development, the merged firm now ranks among the top in Qinghai by the number of employees.
Qi Huicheng was once the founder of Zhifan Law Firm, and is now director of Dentons Xining. He recalls that when Zhifan entered the fifth year of development, he “clearly felt bottleneck, especially for emerging and high-end business which was very difficult to develop.”
“At that time, I said to my partners: No matter how a local firm develops, it will always be like swimming in the shallow sea. We need to take the team to the bigger ocean.” Although it has been only two years after the merger, Qi has already seen his original vision gradually becoming a reality: after the merger, Dentons Xining nearly tripled its performance in 2021 on the original basis, and “the number of State-owned enterprise clients and non-litigation business have increased significantly.”
In 2018, Dentons’ Lanzhou office was established. Its director, Pei Yanjun, tells ALB that before joining the Lanzhou office, he was also one of those lawyers who grew up in local firms. “Local lawyers usually do not have a very wide vision, and are still focusing on traditional fields.” Choosing to join Dentons is precisely to leverage the brand advantage of a large firm to achieve development beyond locality restrictions.
Dentons’ Lanzhou office already had more than 100 employees when first established. Now it has over 130 practising lawyers, and “ranks among the top three in Gansu whether in terms of employee number or business turnover.” Pei points out that on Gansu’s legal market, “scale” still brings great advantages, which is clearly reflected in the brand reputation, bidding performance and internal specialisation of Dentons Lanzhou.
NEW CHANGES IN TRADITIONAL SECTORS
Gan-Qing-Ning shares similar development history and resource status. Energy, construction and other industries play a pillar role in all three places, and are also sectors that traditionally have greater demand for legal services.
In terms of energy, coal in Ningxia, hydropower in Gansu, and hydropower and solar energy in Qinghai should not be underestimated. In the past few years, the “carbon peaking and carbon neutrality” goals mean that wind power bases and photovoltaic power plants are fast being built in Gan-Qing-Ning which already have the advantages of clean energy.
In 2021, the booming of the energy industry increased the added value of Ningxia’s coal industry by 15.1 percent. “Ningxia’s economic development mainly relies on coal energy. Coal is firstly used for power generation and secondly for coal chemical industry development. The Ningdong Industrial Park, which is mainly built to develop the coal industry chain, was completed in the year 2000, contributing almost half of Ningxia’s GDP,” says Gao of Dentons Yinchuan. In addition, “Ningxia is also gradually developing new energy. Wind turbines are standing on many hills, while photo-voltaic solar panels are scattered all over suburbs and sandy fields.”
Meanwhile, according to Pei of Dentons Gansu, “Gansu has two major advantages. One is hydropower, and the other is new energy. In recent years, many central enterprises from across the country have come to invest in energy construction in Gansu. You will find that the vast Gobi Desert has already been covered by photovoltaics.”
In Qinghai, Qi of Dentons Xining observes that State-owned enterprises are already preparing for business such as photovoltaic energy and straw incineration. On the other hand, “Qinghai boasts a large swathe of salt lake which contains 40 percent of China’s lithium resource. Lithium is an important raw material for lithium batteries in cars. Geely Group has already invested more than 60 billion yuan here, eyeing the lithium industry.”
There is a saying in China, “If you want to get rich, build roads first.”
Achieving connectivity in the vast western region has always been the essence of the western development strategy, which has driven the rapid development of the construction engineering industry there in the past two decades.
This is also reflected in a law firm’s client mix. Pei shares that Dentons Lanzhou currently serves close to 280 construction enterprises, “contributing to a large bulk of our revenue.”
Construction enterprises are also clients that Dentons Xining focuses on. Qi comments frankly that since nearly 90 percent of Qinghai’s infrastructure construction projects adopt transfer payments from the Central Finance, a large number of local projects are completed by central enterprises. “They will first consider panel firms of their headquarters. We are coordinating with the Dentons’ headquarters so that similar projects can be shifted more to the Xining office in the future.”
After serving construction clients for such a long time, Pei has observed profound changes in this field in recent years. “One is the frequent occurrence of lawsuits in the construction industry due to economic pressure brought by the pandemic, and the other is the dramatic increase in non-litigation business such as bond issuance, restructuring, and mergers and acquisitions by relevant companies.”
Another change is the widespread adoption of the “public-private partner-ship (PPP)” model. Under this model, an enterprise participates in an infrastructure project from the moment the project is established, and follows through subsequent design, construction, concession operation, etc. Therefore, Pei tells ALB that now lawyers also need to accompany a company throughout all the processes. Such company “requires legal advice from lawyers for every decision, which lets us get deeply involved in the company’s management.”
Qi also feels deeply about this. In construction, he calls this new service model “full-chain legal services from start to operation, and legal fees have also changed from itemised charges to full-chain service fees.”
Apart from the construction industry, the traditional finance and real estate sectors served by Dentons Xining have also undergone similar changes. “The financial sector used to be mainly about the collection of non-performing assets, but now financial institutions require lawyers to have venture capital, funds and asset companies that they are familiar with to realise claims through restructuring. Therefore, lawyers cannot just go to court, but must be familiar with investment banking business and have corresponding resources.”
In the real estate sector, Dentons Xining has even encountered cases with companies asking law firm teams to act as transitional managers when projects ran into problems. “This has gone beyond the lawyering business we used to know... Our products must keep up with the needs of clients, so that we can handle challenges with ease and confidence.”
NEW SECTORS EMERGING
While innovating traditional services, lawyers in Gan-Qing-Ning are also constantly following the development of new industries in the hope of expanding into new business areas.
The first area worth noting is the gradual implementation of digital economy. In the digital era, the demand for digital infrastructure centred around data centres is increasing. Such infrastructure is energy-intensive. As a result, the reserve of energy, especially clean energy, has become an advantage that cannot be ignored in Gan-Qing-Ning.
In the beginning of 2022, the project of “ Eastern Data Western Computing “ was officially launched. Zhongwei in Ningxia is one of the planned national cloud computing centres. Gao tells ALB that Alibaba, Amazon, and the three major telecommunications operators in China have already built or are preparing to build data bases in Zhongwei.
According to Gao, since the state requires data centre projects to be operated in a joint venture structure involving multiple companies, “the services we provide are mainly for setting up corporate equity structures and assisting companies in complying with local government regulations.” However, Gao believes that the services provided by lawyers in Ningxia for the digital economy are still “too traditional... We encourage young people to deepen their study in this field to find service break-throughs.”
Qingyang in Gansu is also one of the national data centre clusters planned under the project. However, Pei says frankly that the corresponding construction has not yet been fully rolled out, and Dentons Lanzhou “is actively discussing with the local government and hopes to get involved as soon as possible.”
Thanks to the location advantage of northwestern China in connecting Eurasia, foreign-related legal services also continue to develop in the past years.
Although Gan-Qing-Ning have always been called the bridgehead of the “Belt and Road Initiative,” due to local export-oriented economy being less active, lawyers there almost had no opportunity to serve foreign-related business in the past. The opening of Trans-Eurasia Logistics, and the establishment of various bonded areas and pilot cross-border commerce zones are changing this situation.
Qi of Dentons Xining has a lot to share. “There are more than 170 enterprises in Qinghai that are ‘going global’, as well as entities from Pakistan and the Middle East that set up shop in Qinghai. The demand for foreign-related legal services is quite high. We will explore further after the pandemic, and foreign-related business may become a new growth highlight for the Xining office.”
In addition to matching the development of local industries, some legal practice areas have also achieved impressive growth in Gan-Qing-Ning in recent years.
For example, bankruptcy and restructuring has become one of the star practice areas of Dentons Xining. Qi shares that the Xining office has applied to become a bankruptcy administrator recognised by the Qinghai Provincial High People’s Court. With the demand of enterprises for asset reorganisation rising amid the pandemic, this practice area has achieved rapid development.
In addition, the Xining office has made breakthroughs in both digitisation and standardization for bankruptcy practice. For example, with relevant software, lawyers can now organise online creditors meetings of up to 300 attendees, and bankruptcy reorganisation has become a standardised practice in the Xining office where juniors can get up to speed quickly after receiving training.
Qi and Pei also both point out the rapid development of compliance and capital market practices in Qinghai and Gansu. On the other hand, Gao high-lights the development of government legal services. In addition, Dentons Yinchuan also has teams of lawyers specialising in family wealth inheritance, human resources, criminal law, and finance.
When it comes to the focus of development in the next stage, Gao says: “In the past two years, Ningxia has listed nine major industries, namely goji berry, wine, dairy, beef cattle and Tan sheep, electronic information technology, new materials, green food, clean energy and culture and tourism.” Taking the dairy industry as an example. Big brands such as Yili, Mengniu and Guangming have all set up production and processing bases in Ningxia, with an annual output of 60 to 70 billion yuan. “We should still aim at the government’s policy priorities and actively participate.”
SEEKING MATURITY
As mentioned above, restricted by economic development, incomplete statistics show that the total number of lawyers in Gan-Qing-Ning has just exceeded 10,000, and there are about 840 law firms in those three places, most of which are small firms. However, the legal markets in those places have also undergone rapid changes in recent years.
“In terms of maturity and future development, Gansu is an emerging market. In the past, a firm who can generate revenue of two or three million yuan was considered a top firm. Now it is common for a firm to generate tens of millions, or even close to 100 million yuan in revenue. Moreover, the legal services market continues to expand, and various new business formats have emerged, giving lawyers more business,” says Pei.
However, the pressure on lawyers is not small. According to Pei, “the arrival of many large firms in Lanzhou has raised the level of legal services of lawyers in Gansu, but has also put a lot of pressure on local lawyers. Within the next three to five years, small full-service firms will largely be eliminated. In the future, Gansu’s legal market will evolve in two directions: large flagship firms and small boutique firms.”
According to data from the National Lawyer Credit Information Publicity Platform, there are currently 14, 10 and 22 local offices of non-local firms in Lanzhou, Xining and Yinchuan respectively. Gao of Dentons Yinchuan has much to say about competition. “Ningxia has 4.5 lawyers per 10,000 residents, above the national average. Competition thus is very fierce. However, the development of innovative business lags, as a result of which everyone is competing in traditional fields.”
Gao says Dentons Yinchuan looks forward to developing together with peers. “Our training and activities are all open, and we welcome everyone to join us online to learn and make progress together.”
The past three years of the pandemic have also brought new challenges to firms in Gan-Qing-Ning. For example, Qi points out that before the pandemic, Qinghai’s annual GDP was about 300 billion yuan. “Under the pandemic, this figure may shrink dramatically, but the number of practicing lawyers is increasing year by year... In addition, firms like Dentons Xining that adopt an integrated system also face cost increase.” As such, Qi believes that the only way out is to rely on occupying new markets by “venturing into new areas, nurturing clients, and making clients willing to pay for high-quality services.”
FUTURE STRATEGIES
In order to seize opportunities in an ever-changing market, formulating and implementing correct strategies is the key. Heads of Dentons’ offices in Gan-Qing-Ning have their own thoughts.
Qi of Dentons Xining has put digitalisation on the agenda. “I have been thinking about how a national brand like Dentons can localise on the Qinghai market. In addition to brand reputation, it is also necessary to let clients clearly feel the advantage of differentiation during service delivery. To this end, we require young lawyers not only to master basic computer office tools, but also to be proficient in visualisation software so that they can display complex legal relationships and business processes with clear diagrams to enable clients to grasp relevant information at one glance.”
In the eyes of Pei of Dentons Lanzhou, the future development of a firm lies in continuously developing new business areas and emphasizing specialisation while not abandoning traditional practices. At present, the Lanzhou office has already set up more than ten specialised teams.
In addition, management is also on Pei’s radar, especially management with human touch. “The common problem of lawyers is that they are detached from the firm. So, we hope that apart from professional exchanges, we can also design more mechanisms to show our care for everyone.”
Gao of Dentons Yinchuan hopes to respond to the ever-increasing competition with specialisation, teamwork, development of new business and training of young people. “Everyone has been talking about specialisation for a long time. In Yinchuan, however, not many people have pursued specialisation, but those who have done so are developing very well... We have already introduced some new policies to encourage the formation of specialised teams internally.”
The Dentons brand and the collaborative resources of 46 Dentons offices across the country also provide confidence for the future development of its Gan-Qing-Ning offices. “Dentons has more than 8,000 lawyers across the country, formulating into a huge market and client base,” says Qi. “How to better develop the markets it has already occupied and open up the channels between offices to excavate market resources? If fully activated, we estimate that we can increase market share by at least 50 percent.”
