Early reports of China's demise during the GFC were greatly exaggerated. Justin Whealing talks to Australian lawyers on the ground and finds out why they feel like they are at the centre of the universe

David Olsson is not hiding his excitement. Olsson, the banking and finance head of the China practice of Mallesons Stephen Jaques, has been based in Beijing for the last three years. Describing his time in China as "the most demanding role I have ever had", Olsson nonetheless says he "has never been more excited in my life, than I am at the moment".

Much of that excitement, says Olssen, comes down to feeling like he is currently at the centre of the world. "The emergence of China's economic and political power means that everybody is looking at China, and everything that we do has some sort of particular relevance to the rest of the world, particularly Australia."

China has deliberately pursued a strategy of "soft" power, which has seen it emerge as a leading diplomatic and political player, as well as an economic powerhouse, over the past decade. Its strategy, to win influence abroad through persuasion rather than force, has seen it initiate an unprecedented level of cultural and economic exchange programs and forums, with the ruling Communist regime balancing its greater engagement with the international community with an iron fist approach to any political dissent.

Mallesons was one of the first foreign firms to open an office in China, and has been able to cash-in as the good times rolled.

The firm has acted for all of the "big four" Australian banks in relation to their early forays into the Chinese market, and also counts China Constructions Holding Limited and the China Development Bank as clients.

Making friends

The work foreign firms can do in China is limited by the fact such firms cannot practice local law. That means many international firms have strategic alliances or referral arrangements with Chinese firms.

In 2007, Gilbert + Tobin announced a strategic alliance with the 600-lawyer strong Chinese firm King & Wood. Allens Arthur Robinson and Mallesons also have a referral arrangement with King & Wood and a number of other local firms.

Rather than open an office on the ground in China, Freehills has gone down the route of establishing an alliance with the local firm TransAsia Lawyers. "We needed to have a presence in China... and we also needed to have a Chinese face and culturally acceptable Beijing-based operation that would attract and be our face to Chinese SOEs [state-owned enterprises] wanting to do outbound work," says John Curtis, the international managing partner of Freehills.

An interesting opinion on whether Australian firms can run a successful China practice on a fly in / fly out basis comes from Harris Chan, a partner with DLA Piper in Hong Kong. Chan joined DLA last year after being with Mallesons for nearly eight years. He believes that you can't be successful in China without a dedicated office.

"I don't think it works at all [firms without a China office]," Chan says. "In China, it is all about relationships... If a contract needs drafting or negotiating, with fly in / fly out, you lose a lot of time."

Green is good

In November 2009, the Chinese government announced that it would look to reduce its carbon dioxide emissions by 40 to 45 per cent by 2020 compared with 2005 levels

Moving with the winds of change, law firms have been increasingly looking to act in this area and build their environmental capabilities as a way of diversifying from its usual meal ticket items of energy and resources and direct foreign investment work.

In July, Mallesons acted for the CSIRO on a $10 million joint demonstration project with China United Coalbed Methane Corporation Limited. The project will involve storing 2000 tonnes of carbon dioxide underground in China's Shannxi Province and the extraction of methane for use as an energy source.

"There are significant opportunities for Australian companies to use their world class technologies and help Chinese companies clean up coalmines that are not operating in an environmentally friendly way," says Olsson.

Minter Ellison, which opened its Shanghai office in 1999, has also acted in this area. "We have seen more and more Chinese companies consider environmental issues and look for opportunities to focus on some products that are environmentally sustainable and renewable, and look for this type of co-operation from foreign companies," says Yi Yi Wu, partner and the firm's Shanghai representative

Mark Green, Minter Ellison's Melbourne and international managing partner says that Chinese companies wonder why Australia has not developed more capabilities in areas such as solar power.

Blake Dawson international partner Michael Wadley has been in Shanghai for nearly a decade now. He says that the growing sophistication of Chinese industry is providing opportunities for firms on the ground.

"One of our clients has just launched a loyalty card program with a number of banks and merchants," Wadley says. "That sort of product wouldn't have been sold here five to ten years ago."

However, due to local regulations, Paul Quinn, the executive partner of Allens Arthur Robinson's North Asian operations and the former managing partner of its Hong Kong offices says the demand for an international law firm is greater when a foreign company is involved.

"If a state-owned enterprise is doing this itself [investing in renewable energy], I don't think there is much of a role for an international law firm," he says. "If it is a joint venture or contractual arrangement with a foreign company, there is [scope for foreign firms to act], and we have a number of clients that are looking at that at the moment."

Business as usual

On 29 March Australian Stern Hu, a former executive with Rio Tinto, was sentenced to 10 years jail for accepting bribes, with three Chinese Rio Tinto employees also receiving jail terms.

All of the fee earners Lawyers Weekly spoke with said that Australian firms across all industries have not suffered any adverse reputational damage as a result of the conviction. "Everyone took the view that it was business as usual, and let the politics run its course" Curtis says. "It was a period where the governments of the respective countries [Australia and China] were not happy with each other, but I noticed no souring of relationships between businesses."

This was echoed by Fred Kinmonth, a partner with Minter Ellison in Hong Kong. "In my experience it has never been mentioned," he says. "But as a parting comment, I would like to say that it is a very good time to be a partner in an Australian law firm.