What Do Chinese Clients Want?

Abstract

The world’s two largest economies are locked in an escalating trade war, and caught in the crossfire are hundreds of Chinese multinational companies (MNCs) that have made substantial U.S. investments. Facing heightened legal risks in a less hospitable environment, the Chinese MNCs increasingly depend on local lawyers. Yet, their purchase of U.S. legal service, a topic of both practical and theoretical importance, has received little attention. To fill the gap, this article empirically investigates how Chinese companies in the United States select their U.S. legal counsel. By analyzing a unique dataset, the article finds that Chinese MNC managers uniformly prioritize candidates’ practical experience and ignore their educational credentials. Legal fees matter, but to a much lesser degree than what one might infer from anecdotal evidence. Some Chinese MNC managers also pay close attention to a U.S. lawyer’s or law firm’s prestige, their Chinese or U.S. government background, and to lawyer recommendations by acquaintances or by the companies’ Chinese headquarters. Further empirical analysis of lawyer selection preferences unveils variable connections with the ownership types of Chinese investors. Sectoral regulation, in-house legal capacity, and U.S. investment size also correlate with one or several of the lawyer selection preferences. The findings offer insights useful to U.S. lawyers and policymakers concerned with the opportunities and threats posed by the global expansion of Chinese businesses and contribute to theoretical debates on multiple topics, such as emerging market MNCs and their impacts on the legal profession and the legal service market in the United States and other developed countries.

Keywords: legal profession, legal service market, Chinese FDI, state-owned enterprises, US-China relations, US law

JEL Classification: K40