This year has seen a rapid retreat of U.S. law firms from their mainland China offices, driven by a confluence of economic, geopolitical, and legal hurdles.
According to legal services database Leopard Solutions, the headcount of U.S. law firms in China plummeted from 643 in 2022 to 545 by July 2024. The exodus marks a stark contrast to the expansion seen during the global dealmaking boom and anticipation of China reopening post-pandemic.
Before the pandemic in 2019, there were 64 U.S. law firms in mainland China, a figure that has since dwindled to 61 as of last week, with projections indicating it will dip below 60 by year-end.
Dechert, a prominent U.S.-founded firm, announced its complete exit from China by year-end, impacting its Hong Kong and Beijing offices which currently house 14 partners and associates. The firm clarified its ongoing commitment to the Asia-Pacific region through its Singapore office, while also announcing the closure of its Chicago office.
Weil, Gotshal & Manges similarly closed its Beijing office in March and is set to shutter its Shanghai location, consolidating its Asia operations in Hong Kong. The firm emphasized its dedication to maintaining a robust Asia practice.
Legal consultant Peter Zeughauser highlighted various factors prompting firms to leave China, including concerns over attorney-client privilege, due process, cybersecurity laws, and recent legislation such as the espionage act. He noted a prevailing sentiment among firms that business opportunities in China may continue to diminish in the foreseeable future.
Amidst escalating U.S.-China tensions, exacerbated by the upcoming U.S. election, foreign businesses, including law firms, have expressed heightened apprehension. However, analysts suggest that geopolitical considerations are already factored into firms’ strategic decisions.
The decline in the number of Chinese offices of foreign law firms has been evident since 2017, as per data from China’s Justice Ministry, which reported 205 such offices by the end of 2022.
Morrison Foerster recently announced plans to wind down its Beijing operations by autumn, consolidating its China-related work in Shanghai and other regional offices. Similarly, Mayer Brown’s decision to split its China operations underscores the shifting dynamics impacting U.S. law firms’ presence in the region.
As these firms navigate complex regulatory landscapes and geopolitical uncertainties, the future trajectory of U.S. legal involvement in China remains a pivotal issue amidst broader international relations.