[Ed. note: This post is authored by Evan Jowers and Robert Kinney of Kinney Recruiting, sponsor of the Asia Chronicles. Kinney has made more placements of U.S. associates and partners in Asia than any other firm in the past four years. You can reach them by email: asia at kinneyrecruiting dot com.]
Evan here. As we have been predicted would happen in past posts, a sizzling biglaw US associate lateral hiring boom has arrived in Hong Kong / China for the first quarter ’11. We expect this hiring boom to continue until spring, with hiring being steady afterwards but dropping to more normal levels.
A “perfect storm” has developed, causing many US and UK firms in Hong Kong / China to have multiple US corporate / cap markets urgent openings at one time now.
A lot of these top firms in Hong Kong / China have been understaffed since late 2009. When the global recession went into full swing in late 2008, the downturn had started to seriously affect biglaw deal flow in China (about a year after negative effects were felt in US and other Western markets), with IPOs coming to a stop. There was misguided concern at the time that because China had some dependence on US exports for its economy to be fully fueled, China would be heading into a bubble-busting down turn, even much worse than what was taking place in the US. However, in mid-’09, deal flow in China was booming again, fueled in large part by China’s own consumer economy expanding rapidly. This was no surprise to many of us who have observed China for several years. After all, 2009 was the year that China over took the US in new cars purchased annually, China overtook India in gold purchased annually, and the Asia Pacific Region overtook North America in daily commercial flights.
But much of the world was skeptical the boom could continue more than a short time (dramatic bubble-busting predictions sold newspapers and perhaps made some Westerners feel better about themselves) and thus senior firm management at many firms were reluctant to invest heavily with new hires in China, especially considering the recession in West. With the worst recession of our lifetime in full swing, most US firms were on a global hiring freeze and trying to avoid more layoffs, rather than trying to hire laterals for China. The feeling was also that if there was a need to staff up on some deals in China, it could be done by sending over associates not busy in US, at least temporarily, which was a band-aid on what was becoming an understaffing problem. Further, it was just bad internal politics back them for a partner at a US firm in Asia or elsewhere to try to pressure their management for lateral hires because of the big push in ’09 to keep down costs and try to salvage profit numbers (to help recruit and retain partners) in the midst of a major recession.
By late ’09, some firms which had been in global hiring freeze started to make exceptions in China and allowed a hire here or there. In the first half of ’10, this trend continued. By the second half of ’10, it was a bit easier for top firms to get the green light from their global management to make more hires in China, but all during ’10, many of their associates in Hong Kong and the mainland were being heavily recruited by banks, firms and other entities, due to being in full scale boom that showed no signs of slowing down (for the most part).
Also, from late ’09 through today there have been some key Hong Kong local cap markets / corporate group acquisitions by top US firms. This has been a relatively new trend and global firm managements put a lot of focus on bringing in these groups. In order to have a local Hong Kong practice, foreign firms in Hong Kong must have an office with 50% or more of their total attorneys Hong Kong qualified. This numbers ratio issue, as well as the expensive investment firms were making on Hong Kong local practices, kept a number of firms from having the full green light to hire US associates in Hong Kong / China.
During the past 18 months there have been a number of events or predicted events that many economists predicted would fantastically derail China’s boom economy (selling more newspapers of course in the process), but China has blown through each hurdle and all the while giving global firm managements more confidence to fully invest in hiring in China. In mid ’10, the crisis in Greece and the EU caused the world markets to fall, including in Asia, and the thought amongst people we met with in Hong Kong / China at the time was that IPOs might finally slow down for a while, that China would push through the ABC deal and then things may be flat for a while. There was concern for a few weeks, but soon after deal flow continued to boom as never before.
In fact ’10 was the biggest year ever for IPOs in Hong Kong / China. No one expects this level of deal flow to continue at quite this pace even if the general boom continues for years. Also, IPO work is becoming more commoditized, with pressure on rates, it is not likely that top firms will get top rates for this work at boom deal flow levels indefinitely (there will still be a ton of this work, but firms will have to also diversify more into other corporate areas), even if the boom continues. However, because things have been so hot and now for more than 18 months and show no signs of slowing down throughout ’11 and into ‘12, global firm management at firms have caved in to their China partners requests for full green light to make US associate and other attorney hires. Another factor in this full green light happening at most firms is because it is natural to make such decisions at or near the end of a calendar or fiscal year and also firms realize many of their peers are doing same.
So we now have a situation where US partners in Hong Kong / China have been understaffed for 18 months, at some times badly understaffed, while they have been pitching global firm management for many months to allow more hires, and all of the sudden there is a full green light.
We know of some top firms, for example, in which US partners in Hong Kong / China had to, as recently as November ’10, jump through hoops for weeks to get clearance to give an offer letter to a US associate they verbally offered. Some of these same firms in December ‘10 and January ’11 are suddenly being given the green light by management to hire as many as 10 US associates in Hong Kong / China.
US partners in Hong Kong / China are finding out quickly though that while they had for two years the luxury of always being able to interview and hire the perfect candidate on paper, the native Chinese cap markets mid-level from a top 5 NYC firm for example, because they constantly had a roster of 5+ of such candidates, nowadays suddenly they are having to scramble to recruit these candidates, who are quickly coming off the market and not only receiving offers left and right, but also turning them down (can only join one firm after all).
Thus, there is some constructive panic going on in US biglaw hiring circles in Hong Kong / China and top firms are going to have to drop their selectivity somewhat. The top tier firms will make concessions on practice fit before they make concessions on academics. The 2ndtier firms typically are quicker to make concessions on academics before practice fit. Most firms are still going after fluent Mandarin speakers (or in many cases Korean speakers) but the pressure on the market is causing more “English only is ok” to pop up.
Also, keep in mind that if you happen to be native Chinese and at a top NYC firm and give notice this quarter due to a lateral move to Hong Kong / China, your firm may pull out all the stops to convince you to rescind your offer acceptance (even if you accepted the offer months ago and your new firm gave you flexibility with start date and is counting on you to join them). Such efforts will include a big show with senior partners, including in many cases the firm chairman or global practice head, stopping by your office to convince you to not worry about your new position and just transfer with them. Suddenly transfer requests that were turned down or put off indefinitely become instantly approved, with talk of you being the star of your class, with realistic shot at partner down the road, and that the firm will try to give you your specific practice preference in Hong Kong / China, even if you don’t want to help staff the IPO deals booming through. It may sound comical, but it is happening at some firms. Try to keep things in perspective.
Why will this sizzling hiring boom, which we feel for this quarter will be stronger than ’07, only last some months? Well, once the understaffed US practices in Hong Kong / China quickly reach critical mass, take care of their understaffing problem of the past 18 months as quickly as possible, hiring will naturally level off. As deal flow continues at boom levels, there will of course be plenty of US associate openings in Hong Kong / China, but not multiple openings at the majority of firms, and not 5 to 10 openings at once at some top firms.