4 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 JANUARY 2024 The sense of unease remains strong in Asia’s legal industry. While life might have returned to normal, and supply chains appear back on track, the region is continuing to experience uncertainty over slowing global economic momentum, tightening monetary policy affecting credit growth, and lingering concerns about inflation. China’s seemingly irreversible economic decline is also hanging heavy. 岁末年初，亚洲的法律产业之上萦绕着一股强烈的不安感。过 去一年，虽然生活秩序恢复正常、供应链保持韧性，亚洲仍经历 了诸多不确定因素的冲击，包括全球经济增速降缓、收紧的货 币政策导致信用收缩，以及通胀带来的持续焦虑。此外，中国经 济的平淡表现也给整个地区发展投下阴影。 BY SARAH WONG 作者：黄婉君 2023 was supposed to be the year of the grand comeback for the international financial hub of Hong Kong. Three years of COVID might have choked its economy, and geopolitical perils might have maimed its investment allure, but Hong Kong was confident of reclaiming the place it staunchly believed it deserved when striding into 2023. But when the year drew to a close, there was a sense of sameness. To the dismay of the Hong Kong Stock Exchange, once Asia’s foremost fundraising powerhouse, the much-touted revival struggled to get off the ground. Hong Kong’s once “free-for-all” capital market is now an arena testing the survival of the fittest. On the face of it, some aspects were reminiscent of Hong Kong’s heydays. “International firms who are strong in capital markets – Davis Polk, Freshfields, Clifford Chance, to name but a few – are still dominating the market, especially HONG KONG: “ADAPT OR DIE” 香 展港 望市 ：“场 适趋 者势 生回 存顾 ”与 BIG STORY after the reopening of the border after COVID,” says Eric Chow, managing partner at Eric Chow & Co. in association with Commerce & Finance Law Offices, one of China’s Red Circle firms famed for capital markets work. But scratch a little deeper, and the picture starts to change. A number of international firms chose to cut staff in response to dampened market conditions. Linklaters cut at least 20 junior attorneys in China and Hong Kong, while Clifford Chance shed four associates in the debt capital market practice, U.S. firms White & Case and Kirkland & Ellis also trimmed the number of associates in their Hong Kong offices this year. “These layoffs suggest that these big global firms are not seeing enough deal flow or volume in their corporate or transactional teams,” says Basil Hwang, managing partner at Hauzen. “It certainly doesn’t seem there is much interest in IPOs in Hong Kong for now. These IPO preparations take time, and whoever wants an IPO in 2024 should be preparing now, and I’m not hearing of a lot of these preparations going on. That might not bode too well for the IPO market.” The elephant in the room, of course, is China’s slower-than-expected economic recovery, and Nicholas Plowman, Hong Kong managing partner at offshore firm Ogier, says that it has forced many firms to play defence. Michael Padarin, Hong Kong managing partner at offshore firm Carey Olsen, agrees that international law firms in the city still rely to a large extent on in and outbound business from China. “If they are here but can’t do work for Chinese clients, then that puts them in a challenging situation,” he says. “Although for some bigger U.S. firms – we understand that a key function of the work they do is to help with the operation and expansion of larger global private equity firms into Asia. So, there are reserved pockets of work continuing, but the China-focused corporate M&A work, for example, will currently be slower until the market rebounds,” adds Padarin. Indeed, with Hong Kong still mired in the crossfires of escalating Sino-U.S. animosity, law firms and the clients they serve have been constantly pondering the long-term commercial viability of their presence in Hong Kong - the Chinese special administrative region increasingly seen as being shackled by Beijing’s signals. And with no immediate sea change in sight, more global firms are concluding that their Hong Kong operation may not be worth the trouble. Chicago-headquartered Winston & Strawn has reportedly become the latest international firm to shut down its Hong Kong office after 15 years, following in the footsteps of the likes of Texas-based Baker Botts and Orrick, Herrington & Sutcliffe, founded in San Francisco. Hwang, who planted Dechert’s first flag in Asia and ran the Hong Kong office of the Philadelphia-based firm for six years till 2014, says managing partners sitting at overseas headquarters need to ask themselves two questions. “First, how’s the business been the last 12 months for
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