When China acceded to the World Trade Organisation in 2001, many forecast a period of unrivalled opportunity for both foreign and domestic investors. While actual progress has yet to match the outpouring of optimism, Hong Kong's law firms remain upbeat about the business possibilities. For a legal sector dependent on the fluctuating economic fortunes of all major industries, the promise of WTO membership is steadily translating to genuine rewards. In 1990, China attracted about US$3.5 billion in foreign direct investment (FDI), representing a third of total FDI in Asean member countries. Today, that figure can be comfortably multiplied by 15 to accurately reflect the new investment realities, while FDI in other members of the Association of Southeast Asian Nations is stagnant or declining. These facts are worth remembering, says Ian Lewis, partner at Johnson Stokes & Master, even if WTO effects are more gradual than otherwise. 'It should be remembered that the changes that WTO [membership] is bringing are being introduced gradually, and not all sectors are being opened up to greater foreign participation,' says Mr Lewis. 'WTO [membership] is just one of many factors that make China an attractive market for foreign investors.' Shearman & Sterling partner Ed Turner says the effects of WTO membership may be more indirect than otherwise, but are still significant. 'The WTO is indirectly important,' he says. 'Some of the investment that is driven by changes in [mainland] laws is becoming significant. To say that [WTO] changed the scope or nature of our work would be to overstate it.' Hence, Mr Lewis believes the impact of WTO accession should be placed in a proper perspective. 'The China market is a market that Hong Kong law firms cannot ignore. This is not simply because of WTO accession. The China market has been important for many years and would almost certainly have remained so in any event. However, WTO [membership] is one of the factors that has encouraged investment in China and should help ensure continued growth,' he says. Robert Milliner of Mallesons Stephen Jaques points out that WTO membership has also resulted in a definite shift in the trend of outbound investment from the mainland. 'As a general matter, the freeing up of trade into China and the growing tendency for Chinese businesses to want to look outside China is creating more opportunities for legal work for international law firms,' says Mr Milliner. His comments are supported by Mr Lewis, who says outbound work may eventually supersede inbound work. 'Law firms should focus not only on the benefits of investment into China but also the likely outbound investment in other international markets, which is likely to result from China's WTO membership,' says Mr Lewis. 'In the long term, the opportunities for law firms to benefit from this outbound work may be every bit as exciting as the current focus on inbound investment activities.' Andreas Lauffs, a partner in the China Practice Group at Baker & McKenzie, believes WTO membership may have altered the way in which China is perceived, adding the mainland's emergence as a fully fledged consumer market is well under way. 'Foreign investors have always seen the benefits of relocating their manufacturing operations to China, given its competitive and low cost structure,' says Mr Lauffs. 'Traditionally, manufacturers were based in China to produce goods for export to overseas markets.' 'However, as average incomes increase, companies are starting to look at China as a realistic consumer market for the distribution of high-quality products. 'China has managed to keep its cost structure under control while improving quality, therefore becoming a more cost-effective location producing high-quality products for both domestic and international markets.' Mr Lauffs says his firm is already seeing significant increases in activity as a result of WTO membership, with the financial services sector reaping the most benefit. 'The increased activity has been fairly broad based, although there have been significant amounts of new investments in the financial services sector,' he says. For Hong Kong's law firms to benefit from these trends requires the development of strong relationships with both international and domestic clients, says Deacons managing partner Lindsay Esler. 'To fully explore the potential of WTO [membership], firms need to have a strong international client base and, in the future, they will also need to develop relationships with mainland-based clients seeking to expand their businesses to the international market,' he says. While deal flow is on the up, WTO membership has yet to result in the kind of liberalisation of the mainland's legal sector that many had hoped for. Foreign law firms must still be licensed, and are prohibited from advising on issues involving domestic law.