For the first time, a Hong Kong law firm was officially approved on Wednesday to form an association with another firm in Zhongshan, a city in South China's Guangdong Province.

The two firms, Hong Kong's David YY Fung & Co and Zhongshan-based Zhong Yuan Law Firm, have been issued with a licence for their association from the Guangdong Provincial Department of Justice, ending 10 years of unofficial co-operation.

"We will officially share some of our clients as well as the related profits, even though we are still independent," Huang Dongwei, a partner of Zhong Yuan, told China Daily yesterday.

Huang has dispatched several staff to work in David's office in Guangzhou, but all of them still belong to Zhong Yuan.

The Hong Kong Special Administrative Region government and the central government reached an agreement on liberalization measures under the third phase of the mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA III) at the end of last year, which took effect on January 1.

"Under CEPA III, Hong Kong legal representative firms can enter into association with mainland law firms in different cities of the same province, autonomous region, or municipality directly under the central government," Liu Shaohan, an official of the department said.

Under CEPA I and CEPA II, Hong Kong firms were only allowed to co-operate with mainland firms in cities where they had branches or offices.

David YY Fung & Co set up an office in Guangzhou in 1993, but it had an unofficial association with Zhong Yuan in Zhongshan. Their association business became formal when the licence was issued under CEPA III.

Hong Kong currently has about 650 law firms, only 17 of which have branches or offices in Guangdong.

As CEPA III stipulates that a Hong Kong law firm can associate with only one mainland firm, experts believe the policy will not spark an upsurge in joint ventures in the short term.

Editor: Yan