China’s economic growth rate fell short of expectations, while the ongoing trade war between China and the United States has led to increasingly strained relations between the Chinese Communist Party and Western countries. Against this backdrop of internal and external challenges, several foreign law firms have decided to withdraw completely from China, dealing another heavy blow to the CCP.
According to Voice of America, both Chinese and foreign lawyers acknowledge that the deteriorating Chinese economy has significantly impacted the business of law firms. The transformation of the legal system in China, along with execution issues, has also contributed to the exodus of foreign law firms from the country.
Data from Leonard Solutions, a global authoritative law firm database, shows that the number of U.S.-based law firm offices in China decreased from 643 in 2022 to 545 in July of this year, resulting in nearly a hundred closures. In 2019, 64 U.S. law firms had offices in China, but by July 2024, only 61 were left. Over the past year, there have been continuous reports of U.S. law firms preparing to or already withdrawing from the Chinese market.
Major U.S. law firms, such as Weil, Gotshal & Manges LLP, Sidley Austin LLP, Morrison Foerster, and Dechert, have either closed their offices in China or announced plans to do so. The tensions between China and the U.S. and Europe have also affected Hong Kong, with firms like Mayer Brown and Winston & Strawn planning to reduce or close their operations in the region.
Even those foreign law firms that remain in China are scaling back their operations. Data from Leopard Solutions shows that out of the 73 largest U.S. law firms in China, 32 have reduced their lawyer numbers over the past ten years. In Beijing, out of the 48 largest U.S. law firms, 26 have been decreasing their lawyer numbers since 2018.
Foreign law firms view operating in China as no longer profitable due to reduced transactions with the CCP, leading to their decision to leave. Ross Feingold, a political risk consultant from Singapore currently living in Taiwan, noted that Chinese companies are no longer welcome in the U.S. and Europe, reducing the need for legal services related to mergers and acquisitions or investments.
Additionally, the enforcement methods of Chinese law enforcement agencies have made it difficult for law firms to operate in the country. Some firms have faced challenges with clients being targeted by the authorities, affecting their business operations significantly.
The departure of foreign law firms from the Chinese market not only reduces competition but also poses a more challenging outlook for domestic law firms in China. Sichuan Chuangzhuo Law Firm’s legal representative, Ran Tong, pointed out the interdependence and cooperation between Chinese and foreign law firms, highlighting the impact of the foreign law firms’ exit on both sides.
Apart from economic factors, the enforcement methods of CCP law enforcement agencies and their treatment of regulations indirectly complicate the operations of law firms. Ran Tong emphasized the need for the Chinese government to address issues at their core to ensure stable development for enterprises and foreign investors.
While many U.S. law firms have withdrawn from China, some Singaporean firms, such as Rajah & Tann and Allen & Gledhill, have begun expanding their operations in China. Analysts suggest that Singapore has gradually become a bridge between Europe and the Asia-Pacific region, hence choosing to navigate the vast Chinese market despite the challenges.