From Mid-West to Far East

Not everyone in the US is banging the protectionist drum these days. Cleveland-based law firm Squire Sanders & Dempsey didn't just sit back and watch as its Mid-West client base upped sticks to China, it followed them. Now the firm is opening its second China office, in Shanghai.

The ministry of justice awarded Squire Sanders its licence on April 6, almost a year after the firm first applied to open a second office on the Chinese mainland, complementing its other Asian outposts in Beijing, Hong Kong and Tokyo. Dan Roules will continue to head the firm's China practice, moving between the two offices ahead of a permanent move to Shanghai, while national partner Amy Sommers will staff the new office full time. Jim Zimmerman will continue as chief representative of the Beijing office.

Squire Sanders is opening in Shanghai to follow its clients as they move into the Yangtze delta area. "Shanghai is the commercial heart of the world's most dynamic economy," says Roules. "Our multinational clients are very focused on China's growth and extraordinary prospects."

Much of the firm's China work centres on its traditional Mid-West manufacturing clients, but the firm is also advising Japanese companies moving into China thanks to the long-standing relationships cultivated in its Tokyo office - it was established in 1955 by Graham & James and acquired by Squire Sanders through the two firms' merger.

The firm aims to have five lawyers in Shanghai by the end of the year and as many as 15 in two years' time, taking it up to the same size as the Beijing office.

Squire Sanders' push into China comes at a time when other international law firms are also reconsidering their strategies in Asia amid intensified fee pressure and falling profitability, largely as a result of the drop-off in the kind of value-added work that brings in fat fees; notably advice on capital markets and project finance transactions.

With its focus on manufacturing clients Squire Sanders has avoided the fall-out among the securities firms. "We're not focused on capital markets at all," says Roules. "Our growth in China is a reflection of the increasing demand for our services."

For many other firms, whose focus is skewed more towards the financial markets, dwindling profits per partner have forced a strategic overhaul, not just in Asia but worldwide. For all but the biggest players this has led to firms reeling in their empires and focusing to a much greater extent on their home markets.

In 2003 CMS Cameron McKenna heralded this new wave of consolidations when it closed down its Beijing office and shed 40 staff in Hong Kong, even as China was promising to be the miracle economy of the next decade. In 2004 Denton Wilde Sapte upped the ante, pulling out of Asia altogether.

Even Freshfields, one of Britain's so-called magic circle firms, recently closed its Bangkok office. Several US firms have also undergone similar re-organizations.

China and Japan are the two key Asian markets where firms think they can make money. Squire Sanders is just the latest in a long list of firms to expand in China. Latham & Watkins, Paul Hastings and Lovells have all opened in Shaghai in the past year and many foreign firms in Tokyo have renewed their efforts to acquire local advisory capabilities.

Linklaters is rumoured to be in negotiations to create a joint venture with Tokyo firm Mitsui Yasuda Wani & Maeda. Freshfields has added to its local practice recently with the hiring of two Japanese partners. Other firms, such as Ashursts, Dorsey & Whitney, Paul Hastings and Sidley Austin Brown & Wood have all hired Japanese lawyers in the past year and Lovells has committed to expanding its Tokyo practice.