Due to the deteriorating capital markets, structural economic problems, and geopolitical tensions, foreign companies are withdrawing from mainland China. Since the Chinese Communist Party tightened control over data storage within China last year, U.S. law firms have also rapidly downsized their operations in China.
Dechert, a law firm, announced last Wednesday (July 3) that it will be closing its offices in Beijing and Hong Kong later this year. According to the firm’s website, Dechert has 14 lawyers, including 4 partners, in Hong Kong, and 3 lawyers in Beijing.
In a statement, Dechert expressed, “In Asia, we will continue to serve our clients through our Singapore office, maintaining our award-winning practice and providing support for the Asia-Pacific region.”
Public information shows that the U.S. law firm Dechert applied to deregister its office in Shanghai last year.
According to data from legal services database Leopard Solutions, there were 64 U.S. law firms in mainland China in 2019, but as of July 3, this number has decreased to 61, expected to fall below 60 by the end of this year. Additionally, the number of employees in U.S. law firms in China has sharply decreased from 643 in 2022 to 545 in July this year.
The latest data from the Chinese Ministry of Justice shows that the number of foreign law firm offices in China has been decreasing since 2017. By the end of 2022, there were a total of 205 such offices, which is 20 less than the data reported in 2019.
Based on a report by Reuters in April, Weil Gotshal & Manges, headquartered in New York, announced its decision to exit the Chinese market and is currently discussing the closure of its Shanghai office. The firm confirmed the closure of its Beijing office on December 31, 2023.
In May, Mayer Brown, a multinational renowned law firm headquartered in the U.S., announced plans to divest its Hong Kong business, ending a 15-year partnership.
According to public information from the Chinese Ministry of Justice, in May, Proskauer’s Beijing office and Cleary Gottlieb’s Shanghai office, both from the U.S., also applied for deregistration.
Last year, global law firm Dentons terminated its merger with the Chinese law firm Dacheng (a firm with 8,000 lawyers) citing reasons including new regulations on data privacy and cybersecurity issued by the Chinese authorities.
“Nikkei Asia” cited legal industry consultant Peter Zeughauser, who said that law firms are considering exiting China for various reasons, including the lack of lawyer-client privilege and due process in Chinese law, discomfort with recent spy laws, and cybersecurity concerns.
Zeughauser added, “Most law firms believe that business opportunities in China will continue to decrease and decline until the situation improves sometime in the future, and this will be a long-term rather than a short-term issue.”