O'Melveny is the biggest international firm in Shanghai, owing to Chao's foresight a decade ago. Most big U.S. law firms focused on Hong Kong, and O'Melveny opened a branch there too. But Chao, who had spent a year teaching international law in Beijing and Shanghai in 1985, recognized early on that having a big presence on the mainland would be a competitive advantage. The Shanghai operation opened in 1996, and a Beijing branch was added in 2002, as soon as the government gave the green light. "It was clear that by being there, we could see what was happening and what was coming down the pike sooner and easier than Hong Kong-based firms jetting in and out and getting information on the fly," he says.
He looked smart again when Chinese banks decided to clear their pile of nonperforming loans off the books as a first step to steadying the wobbly financial system. Anticipating a dealmaking frenzy, Chao and his team did their homework before potential buyers came knocking. A consortium led by the Morgan Stanley Real Estate Fund hired Chao and won the bidding on the first and biggest chunk, $1.3 billion in loans from Huarong Asset Management, in 2001. Such successes have made Chao fairly fearless. Last fall, during a staff retreat in Phoenix, Arizona, he led three lawyers from China on a three-hour mountain-biking trip in the blistering sun along rattlesnake-infested rocky roads. "What the heck," he told them. "After China, this is nothing." Reckless attitude? Chao would probably call it risk arbitrage.