Chinese law firms reveal their fees in our exclusive billing rates survey, shedding light on how reduced corporate budgets have affected the cost of legal services. Luna Jin reports

China’s highly competitive legal sector remains a buyer’s market. On the one hand, more than 50,000 people have been licensed to practise law every year since 2018, according to the Ministry of Justice. On the other, in-house counsel are growing in competence, even as their teams grow in size. This gives companies strong bargaining power during legal procurement.

To control costs, more companies are adopting reverse auctions to pick their legal providers. In turn, some law firms are making every effort to win bids at ever lower prices, while some are choosing to stay out of the race, believing that below-cost offers are market killers in the long run and, more importantly, irresponsible to their clients.

In contrast, some companies do not see low prices as the most important consideration when seeking legal services, and are willing to pay a price that actually matches the quality of service.

This is the fourth year that China Business Law Journal has conducted its billing rates survey. By presenting an overall picture of the country’s legal fee structure, we are encouraging more law firms to be transparent with their legal services, thus helping them build trusting relationships with their clients for the ultimate benefit of the wider market.

Our survey offers a nap shot of legal billing trends in China’s vast legal market. The size and practice areas of the firms surveyed are varied, ranging from firms with 10 lawyers to those with thousands.

A total of 30 law firms participated in this year’s survey. The firms surveyed range from niche outfits to full-service operations, and all are from Beijing, Shanghai and Guangzhou, the most active legal markets in the country.

Each firm has revealed their hourly rates for junior associates, senior associates, junior partners, senior partners and managing partners, as well as the percentage of legal work billed by hourly rates. A series of infographics are interspersed throughout this article to help present our findings clearly.

The average hourly rate of the Chinese firms surveyed was RMB2,909 (US$445) in 2020, with a wide gap among firms’ legal service fees and a marked difference in the fees charged by lawyers of different seniority within firms. Hourly rates for junior lawyers ranged from as low as RMB1,200 to as high as RMB10,000 for more senior partners.

It should be noted that hourly billing is not the dominant fee model in the China market, and there are a variety of alternatives adopted by the firms surveyed. For the majority of firms participating, the percentage of legal work billed by hourly rate is not more than 50%.

Compared to domestic clients, foreign clients are more receptive to hourly billing. Paul Zhou, the Shanghai-based managing partner of SGLA Law Firm, says: “About 70% to 80% of foreign clients are charged by the hour, while merely 20% to 30% of domestic clients are charged in this way.”

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