How Chinese Firms Escape the Race to the Bottom

An Interview with Harvey Yan, Chairman of Management Committee at Zhongyin Law Firm

“The demand has not disappeared,” Harvey Yan declares from Beijing, directly addressing concerns about China’s legal market. “Although the economy is at a low position in China now, our clients are not only seeking higher standard services—they now have a good position to seek rebundled services with lower fees, higher standards, and also faster response.”

With 1.8 million lawyers competing in China, the price competition has reached unprecedented levels. Yet Yan, Chairman of the Management Committee at Zhongyin Law Firm, sees opportunity where others see crisis.

The Sophistication Revolution

“Several years ago, I don’t think many Chinese entrepreneurs could accept hourly billing,” Yan reflects on the dramatic shift in client behavior. “But now with more and more Chinese companies going abroad, they have more active chances to cooperate with foreign law firms. I think some of them are getting used to hourly billing, especially those clients with outbound experience.”

This evolution extends beyond mere pricing preferences. “State-owned companies, they generally prefer fixed budgets because they need to go through all the process, all the decision process within the group,” Yan explains. “But sometimes they can accept adjustment mechanisms. For example, I have many state-owned companies—when I help them go abroad—they can accept if my hours already exceed, for example, 120%, they would like to accept this adjustment.”

The hybrid model emerging from this evolution is sophisticated: “Clients are gradually adopting the hybrid structure such as hourly rates with a fee cap, or alternatively fixed fees with defined adjustment mechanism.”

The Trust Bridge

“It is not easy for a company to trust foreign lawyers—for Chinese entrepreneurs it’s the same, and for other countries from other countries is also the same,” Yan observes with characteristic directness. “Usually easy to trust the lawyers from the same nation. So we need to establish a bridge with trust.”

This bridge-building isn’t abstract. “The clients from your country trust your lawyers, and the clients from Chinese market—they usually easy to trust the Chinese lawyers. So we can establish this bridge with lawyers from the two different countries.”

Yan identifies three critical elements: “One is the relationship, just as Powell and other colleagues mentioned. Second is trust. The third element will be the culture—the culture difference. I think this is the most important obstacle for the cross-border transaction. Without the collaboration of the lawyers from two different countries, it’s not easy to bridge this transaction.”

The Chinese Headquarters Phenomenon

“I like to use other words—Chinese headquarters,” Yan introduces a concept reshaping global legal services. “When you look at foreign investment into China, they always say our legal headquarters in the US or in the UK or in Europe. That means they not only bring money, investments to China, but also their legal management system. So China sooner or later will follow this route.”

The remarkable shift is that Chinese companies are now establishing their own global legal management centers. “For example, I have a client—already two years retained us to handle their local legal services, including vendors in Middle East,” Yan reveals. “That means somehow, if we can offer a reasonable price, they are willing to outsource the lawyer management service to external lawyers.”

This transformation positions Chinese law firms as global legal service managers, not just local counsel. “Based on this background, that’s why we will have social events like this organized by Tianze. We try to understand the people before we have a case.”

The Competition Dividend

“I think although it is hard to get involved in this competition, but within so many lawyers competing intensely, I think the final winner will be those with strong market competitiveness,” Yan argues. “Especially with the trend of all the Chinese enterprises go abroad, I think the emergence of internationally recognized lawyers through this process—it’s no small feat. I think it’s also good chance for Chinese lawyers to get globalization.”

This Darwinian process has unexpected benefits. “Big law firms and international law firms, we must compete with this change in the market,” he acknowledges. “But from my perspective, I think there can be good news for our Chinese lawyers.”

The Brutal Truth About Chinese Clients

Yan doesn’t avoid uncomfortable realities. “I have to say, Chinese culturally are not familiar to pay legal fees in a very generous way. That’s the challenge,” he admits with striking candor. “Even very successful Chinese companies, when they pay legal fees, they are very mean. Although I’m Chinese, I’m a Chinese lawyer, I love my country very, very much. But I have to say I observed some international law firms or some leading service providers already put Chinese companies in a not welcome category because they are too mean to pay legal fees and they are very demanding. Always ask for discount, but very demanding.”

“That’s reality,” Yan states simply. “I wish it can be changed and should be changed very soon.”

The Future of Cross-Border Practice

“The only certainty will be the changing everything is changing,” Yan observes. “I don’t think the emerging sector can be fixed for several years.”

Looking ahead, he sees specific opportunities: “Most of our correspondent experience focused on the correspondent transactions and the allocations of Chinese law for Chinese companies, and also antitrust, and also about the export control and even the anti-sanctions, and also the foreign investment compliance and also the national security review.”

“In the next few years, because with so many Chinese companies going abroad in these couple years, I think in the future, more and more correspondent disputes will appear. So I think one of the emerging areas will be the correspondent dispute settlement.”

Building Real Networks

“Every people in legal society, they are very active to do marketing, to do pitch work,” Yan observes. “But quite often we will face a situation—we have a critical case, very important client, but we could not find a lawyer who can trust because you should know not only the fees. Frankly speaking, cheap fees or expensive fees, it’s very much not an issue when you try to identify who will be the suitable counsel for your case or project.”

“Even people can offer a very competitive price—do you trust him? Do you know his working style? It’s also a problem,” he emphasizes. “Sometimes you will experience very harsh Chinese bidding process, but frankly speaking, in quite a lot occasions they already have someone they prefer. So that’s the value of networking and build up trust within a community.”

About Harvey Yan

Harvey Yan serves as Chairman of the Management Committee and Senior Partner at Zhongyin Law Firm, one of China’s earliest partnership law firms. A graduate of Peking University Law School with a Master’s degree in Law, Yan also completed the “Peking University Global High-end Legal and Business Talent Program (GLBE) Future Leaders Class” and studied M&A and economics at the London School of Economics (LSE) and Imperial College London.

He is a member of the China Mergers and Acquisitions Association Expert Committee, the China International Chamber of Commerce Expert Committee, and the National Federation of Industry and Commerce Legal Rights Protection Lawyers Group. Recently honored as one of the “2022 Brand Influence · Top Ten Leaders” and awarded the “2022 Annual Outstanding Management Influence Person” by Legal News Agency, Yan was also recognized with the “Best M&A Lawyer” honorary title at the 17th China M&A Annual Conference by the China M&A Association.