Southwest China was often considered underdeveloped and isolated, but buzzwords like “high-tech”, “big data” and “internet influencer economy” are now describing the region, and national firms are rushing to cash in on the newfound prosperity. Sha Miao reports
Comprising Sichuan, Yunnan and Guizhou provinces, Tibet Autonomous Region and the city of Chongqing, Southwest China is a rugged mountainous region that borders India, Pakistan, Myanmar, Laos and Vietnam. The difficult landscape has resulted in slower infrastructure development, which has historically restricted the growth of local economies.
Despite this, each of the provinces and cities in southwestern China, although often lumped together, bring their own specialties to the table and offer immense potential for growth.
Yunnan and Tibet are China’s gateways to Southeast Asia, South Asia and West Asia, while Sichuan is a bridge between the hinterlands and the more developed central China, Chongqing is a major financial hub along the Yangtze River, and the Guizhou Plateau has rich mineral and ecological resources.
On 17 May, the central government issued guidelines on advancing the development of western regions, an upgraded version of the development strategies implemented in the region starting back in 1999. The new guidelines have made “western development” a hot item again.
Tale of two cities
Sichuan and Chongqing are the stars of southwest China. Chengdu (the capital of Sichuan province) and Chongqing economic zones are developing rapidly, and have become the “fourth pole” of China’s economic growth, alongside the three major economic “poles” of the Yangtze River Delta, Pearl River Delta, and Beijing-Tianjin-Hebei region.
In November 2017, Chengdu set up a multi-channel network (MCN) Industrial Park, which aims to attract MCN agencies and We-media platforms that create content. Jiemian News, a finance news platform, reports there were about 200 MCN agencies and subsidiaries in Chengdu in 2019.
“The internet influencer economy has become a trend,” says Liu Feng, a partner at King & Wood Mallesons’ (KWM) Chengdu office. “The private economy in Sichuan has been active for a long time. Local people have a strong will to spend money, and the internet influencer economy is closely related to catering and tourism industries.”
However, Liu says the internet influencer economy has, however, given rise to many compliance issues, including celebrity intellectual property (IP) protection, consumers’ rights, and third-party e-commerce platforms.
Li Lu, a senior partner at Jincheng Tongda & Neal’s Chengdu office says Sichuan “has competitive advantages in the TMT industry”. Top firms like Alibaba, Baidu, Kwai and iQiyi have settled in Chengdu, focusing on areas such as 5G communications and artificial intelligence (AI).
Biomedicine is also a sector that Sichuan lawyers are optimistic about. With the solid research background of the West China Hospital of Sichuan University, Chengdu has set up research centres for clinical research on drugs and medical services, and global production of biotech medicines.
Sichuan and Chongqing are not only connected geographically and culturally, but also in economic and social development. In October this year, the central government issued the “Outline of the Construction Plan for Chengdu-Chongqing economic circle” to further promote the opening up and co-operation between the two provinces.
“The establishment of the strategy of Chengdu-Chongqing economic circle will boost the integration of the legal markets in both cities,” says Eagle Yang, a partner at Zhonghao Law Firm’s Chongqing office.
Chongqing is an important automobile production base in China, with a relatively complete supply chain. Despite being hit hard by the pandemic, and some small carmakers closing down, lawyers are optimistic about the prospects for the industry.
“Chongqing is a traditional centre of automobile, electromechanical, chemical, equipment and pharmaceutical manufacturing,” says Xiong Li, the managing partner of Zhong Lun Law Firm’s Chongqing office. “The new energy vehicles industry is developing vigorously,” he adds.
Gems of the highlands
Yunnan, Guizhou and Tibet, spread across the Yunnan-Guizhou to Tibetan plateaus, once labelled poor areas, are actively developing their high-tech industries.
Yunnan has an “entrepreneurship space”, science and technology business incubators, and science and technology parks in universities that have low-tax policies to encourage the development of high-tech businesses.
“In Yunnan, the cross-border e-commerce industry based on the free-trade zone is very promising,” notes Cao Jian, the executive director of Anli Partners’ office in Kunming, the capital of Yunnan province. The cities of Dehong (near Myanmar) and Honghe (near Vietnam) were added to the pilot zones for cross-border e-commerce retail imports.
Real estate and tourism have also been the focus of Yunnan law firms due to the region’s natural beauty.
“Yunnan is known as a real estate treasure bowl,” says Yao Zongliang, a senior partner at Tahota Law Firm in Kunming. From January to September this year, Yunnan province invested RMB316 billion (US$48.28 billion) in developing real estate, an increase of 11.1% on the same period last year, according to the local bureau of statistics.
“Yunnan is actively improving the environment, which has led to a boom in its healthcare industry,” says Pu Libin, the managing partner of Grandall Law Firm’s Kunming office.
For Guizhou, big data has become the new path for development. Guizhou is the first national model zone for the development of big data, and three tech giants – Tencent, Huawei and Apple – have set up data centres there.
Guiyang (the capital of Guizhou province) is running a 5G pilot, a mobile 5G joint innovation lab, and the Unicom big data innovation research centre. Guizhou is also looking to achieve full commercialisation of 5G by 2022.
In recent years, the Guizhou government has issued a number of policies to support development of the big data industry, including the Opinions on Accelerating the Development and Application of Several Policies for the Big Data Industry, and the Outline of the Development and Application Plan for the Big Data Industry in Guizhou Province.
“We can imagine a lot about the future of big data,” says Li Jun, the executive director of Tahota’s Guiyang office. “There are various big data startups emerging. The capital markets are also active, which offers a lot of opportunities.” He adds that compliance in big data is totally different from traditional assets like real estate and IP, especially around data collection, storage and usage.
Tibet is known as the roof of the world, and perhaps appropriately, “high-tech, green industry and clean energy are the key areas supported by the local government,” says Zhang Lili, the executive director of Tahota’s office in Lhasa, the capital of Tibet Autonomous Region. “Urbanisation of the countryside and the preservation and renovation of local buildings have contributed to the rapid development of Tibet’s construction industry,” says Zhang.
For companies entering Tibet, Zhang points to the Western Development Policies, and the Preferential Policies for Counterpart Assistance to Tibet. “According to the local legal policies, they are open to investors except for industries explicitly prohibited by national laws and autonomous region polices,” she says.
Among preferential policies, the Several Provisions on Preferential Policies for Attracting Investment in Tibet Autonomous Region, issued in 2018, shows that enterprises that apply for eligible loans from Tibet’s banking and financial institutions can get a 2% lower rate than the national benchmark.
With the pandemic and the economic downturn, hot practice areas for the region’s lawyers include bankruptcy, restructuring, non-performing assets and real estate group litigation.
“Real estate prices have fallen significantly, and various developers are under tremendous financial pressure, with more and more owners choosing to withdraw,” says Zheng Jihua, a partner at Zhonghao Law Firm’s Guiyang office. “We have seen group litigation quite often.”
Zhong Junfang, a partner at Tahota’s Chengdu office, adds: “With the falling economy, banks are facing greater pressure to reduce non-performing loans. Along with an undeveloped credit rating system, some enterprises have defaulted on loan payments.”
By way of explanation, Gao Jinlin, the director of East & Concord Partners’ Chengdu office, says: “Economic transformation and strengthening of supply-side structural reform are the reasons behind the boom in bankruptcy and restructuring.”
Apart from the above-mentioned sectors, “internal circulation”, which refers to the domestic cycle of production, distribution and consumption, has become a focus for lawyers. “In general, we are having a dual economic cycle, but, in fact, the current economy is still dominated by internal circulation,” says Liu of KWM.
Big firms move in
Consolidation is a word on used often by southwest lawyers as national firms gain traction in the region, overshadowing local firms. “More and more national firms are coming to Sichuan to set up offices,” says Liu. KWM will also open a Chongqing office early next year.
In May, Chengdu had 813 law firms, ranking fourth in the country, and first among central and western cities, in terms of the total number of lawyers and law firms, according to the Chengdu Bar Association.
“The capture of local capital markets, bankruptcy and other high-end business in Chongqing by [national] branded big firms has caused a huge impact on local firms,” says Alex Yang, of Tahota’s Chongqing office.
Xiong, of Zhong Lun, adds: “National mainstream law firms have been injected into Chongqing, and local traditional law firms are merging and reorganising.”
Pu of Grandall, has operated a local law firm in Yunnan for nearly a decade. “National firms have more advantages over local firms in terms of attracting talent and in terms of their management model,” he observes.
Zou Xiaoli, a senior partner at Solton & Partners and vice-president of the Chongqing Bar Association, says that while national firms have certain advantages in integrating resources and sharing knowledge, “Chongqing’s large local firms have a long history, and are still developing strongly”.
Cao of Anli Partners, says the high-end market of Yunnan’s legal market remains substantial. “[Yunnan’s] lawyers are more competitive in traditional and mid and low-end business, but there is a gap in providing services to high-end commercial and emerging businesses,” he says.
Yao, of Tahota, says Yunnan’s legal service level is “medium or moderately low”, lacking the ability to serve in-depth and penetrate deeply into the industry. “There is a comparative lack of professional lawyers locally, and there is no end to low prices and unfair competition,” he says.
Some lawyers also believe that AI, via legal assist robots, will put pressure on traditional lawyers. “AI lawyers have abundant and systematic legal knowledge, compared with traditional legal practitioners,” says Zhang from Tahota’s Lhasa office. “AI is highly efficient and will most likely replace traditional lawyers.”
In 2017, the country’s first legal aid robot, “Longhua Xiaofa”, was piloted in Shenzhen to help people solve legal problems. In 2018, Tibet also introduced the region’s first AI robot, “Fa Xiaojia”, to provide legal services in areas such as marriage and family, labour and personnel work.