In the midst of gathering trade and investment between Asia and North America, the latest firm in the Americas to ramp up its cross-border transactional capability is McMillan.
Victor Tsao, formerly an associate at Farris Vaughan Wills & Murphy, is now a counsel in McMillan’s business law group and co-chair of the firm’s China Practice Group and Japan Practice Group, based in Vancouver. Tsao focuses on financings, securities, M&A, and commercial law, and is fluent in Japanese and Mandarin Chinese as well as English. Though based in Vancouver, Tsao’s practice has a marked cross-border character. In a discussion with IFLR1000, Tsao enumerated a few of the benefits of joining a global network including an outpost in Hong Kong.
Tsao described Hong Kong as a common-law jurisdiction with courts and a legal system similar to Canada’s. Moreover, Hong Kong has a very special relationship with mainland China, he said. According to Tsao, it might be easier in many cases for a Canadian client to enforce a Hong Kong arbitration award or judgment in mainland China as opposed to judgments from Canadian courts. Tsao said that this is one of the numerous reasons behind McMillan’s decision to establish a Hong Kong office serving clients from both sides of the Pacific.
Tsao is not oblivious to the doubts and uncertainty in some quarters about the Chinese market, stemming from the slowdown in the country’s economy. The most recent figures indicate a 7.4 percent GDP growth in 2014, he noted.
“Some people say the slowdown is due to cracking down on corruption, in particular the unhealthy relationship between the government bureaucracy and the business community. To a certain extent, that’s true,” Tsao said.
Nevertheless, while he is not unreservedly bullish about the Chinese market, Tsao is quick to point out how fast it has grown overall in recent years.
“Undoubtedly there are problems, for example, a lot of companies are overextended in debt, especially in the real estate sector, where financing rely heavily on land value for guarantees. In addition, there are certain sectors that have oversupply of manufacturing capacity. Another problem in China is the increased cost of manufacturing, since the labor cost is much higher now than that of five or ten years ago. But at the same time, China has the fastest growing middle class, and with high saving rates among the general public, there’s a lot of cash around. There’s a vast amount of wealth that has been created in the last ten to fifteen years and is now looking for good and reliable investment opportunities,” Tsao observed.
Tsao expects that it will be non-sovereign-owned-entities that pick up the market growth. Even on the SOE side, the Chinese government has initiated experiments with what it calls mixed ownership, he noted.
“They took one of just over 100 large SOEs directly under the control of the State-owned Assets Supervision and Administration Commission, they said ‘You’re going to be a testing ground for mixed ownership,’ and they let private capital come in. That, in my mind, is one big step toward a true market economy. Other than that, I think the Chinese government is also putting more emphasis on innovation, sustainable growth, hi-tech, and green industries. They are trying to grow more value-added industries instead of just plain low-cost manufacturing,” Tsao said.
When it comes to inbound investment, Tsao says that he has seen at first-hand a growing interest from Chinese investors seeking to put their money into worthy assets rather than simply playing the financial markets.
“I expect to see greater inbound investment activities from different players (not just large State-owned entities) than what a lot of the large companies or law firms might be used to,” Tsao added.
Tsao holds a J.D. from the University of British Columbia and a bachelor’s degree from Queen’s University.