By Jonathan Rayner


Gambling on the further liberalisation of China's legal services market is a high-risk strategy, top law firms have been warned.



A report from management consultancy Hildebrandt Strategic Intelligence said the absence of action by the country's justice ministry, after the Shanghai Lawyers Association (SLA) last year claimed that legal services offered by foreign law firms in China far exceeded what is allowed, 'bodes well for the possibility of further liberalisation, but this is not a foregone conclusion'.



The report also highlighted the challenge of intense competition for trained staff, and called on international firms to invest in the development of local lawyers.



It predicted that, despite the risks, law firm investment in the region would continue to grow as China's economic growth generated a constant flow of work. In the past year alone, 14 international practices - including UK firms Clyde & Co and Eversheds - have opened offices in mainland China.



Law Society President Fiona Woolf said the report's conclusions were 'reasonable', and that the Chinese 'are expecting to liberalise further in the future'. She added that the director-general of the Bureau of Justice had, in response to the SLA's claims, praised the contribution of foreign law firms.



Peter Hasson, chief executive of Clyde & Co, said the Chinese market was maturing. This was shown by greater use of litigation in China by European investors and increased outbound work from Chinese companies trading in different jurisdictions.



Andrew Halper, head of Eversheds' China business group, said the firm's new Shanghai office 'had far exceeded expectations'. However, he admitted that finding the right local staff was like 'looking for a needle in a haystack'.