Salaries For Transaction Lawyers In China Cooling Down

We’ve just received the latest Law innsight newsletter published by China based legal recruiters LawInn. And their lead article is actually pretty interesting considering…

There are more than a few lawyers and law firms looking east to maintain the revenue base they’ve been seeing personally over the past few years

Here’s the article in full

Legal salaries COOLING

Salaries for elite business transaction lawyers in China are cooling.  Survey results show the average 2008-2007 year-on-year lawyer salary inflation increased only 2% in 2008.  This represents a significant downturn from the 10% salary inflation in 2007 and 17.3% in 2006.

These numbers come from the recently published 2008 LawInn Legal Salary Survey & Review. ( they provide a link to the free part of the survey but we’ve been unable to access it – the servers are down .. try this url and see if you have any luck ) The details show some winners and some losers.

Regional foreign firms in China—mostly headquartered in Australia, Hong Kong, European countries and Singapore—seem to be weathering the slowdown better than bigger foreign law firms.  The data indicate that these firms continued to raise salaries in 2008.  Data from lawyers employed in regional foreign firms—designated Group “B” foreign firms in the report—show these employers increased compensation an average of 12% year-on-year (y-o-y).

This increase contrasts sharply with the flat average change for lawyers employed in large foreign and PRC law firms.  Data from lawyers employed in Group “A” foreign firms—mostly from the US and UK—show a y-o-y change of +1%.  Data from lawyers employed in PRC law firms surveyed—large/boutique local firms servicing international clients—showed an average y-o-y change of only +0.7%.

Regional foreign firms in China may be gaining some economic advantage during the slowdown.  The practice mix of many of these firms includes a high proportion of general corporate and commercial work.  Much of this work continues during this economic slowdown.  Big M&A and FDI projects make up little of the work for these firms.  Financing constraints, declining business prospects and uncertainty are reducing significantly the big M&A and FDI projects handled by law firms in China.  Shortage of this deal flow particularly affects the large foreign firms.

In the 2007 survey we noted that the gap between compensation paid by regional foreign firms and compensation paid by top tier domestic firms was closing as local firms rapidly increased compensation.  It appeared that regional foreign firms in Group B were being squeezed in the competition to attract top talent.  Domestic firms were catching up fast and Group B firms were not able to follow large foreign firms offering ever higher compensation. (read VOICE in LawinnSight March 2008 edition)  Now, it appears large foreign firms in Group A may be squeezed.  As deal flow and revenue decline, managers of these firms must struggle to pay for high priced talent and high priced offices.

The 2008 data indicate that average y-o-y annual compensation for lawyers working in-house for MNCs declined about 6%.  A decline for this group is not a surprise.  Many MNCs began reducing budgets more promptly than law firms as the sub-prime mortgage problem in the US in 2007 developed into the financial crisis and economic slowdown in 2008.  A critical question:  does this decline in lawyer compensation at MNCs indicate a trend that law firms will follow in 2009?

Lawinn’s main website can be found at

and finally if you’d like to access all the past issues of the magazine they are all here at