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LAWYERS TENDIPOYour browser does not support the element. not to inspire much sympathy, but spare a thought for the foreigners drafting briefs in China. For decades they have confronted a politicised legal system and navigated a difficult regulatory environment. Now they are facing new pressures. China’s sluggish economy and geopolitical tensions have been bad for business, such that many big-name foreign firms are leaving the country.Most notable has been the exodus of American outfits. According to Leopard Solutions, an analytics company, 35 of the top-tier American law firms that maintained operations in Beijing or Shanghai (and in some cases both) at the end of 2023 had, one year later, reduced their presence or shut up shop entirely. Among the most prominent is Paul, Weiss, Rifkind, Wharton & Garrison. The firm opened its Beijing office in 1981 and boasted of having “one of the longest continuous presences of any foreign law firm in mainland China”. In December it said it was leaving.The best explanation for all this is the simplest one: business has been drying up as China’s economy cools down. “Work on mergers and acquisitions is not just slower, it’s pretty much dead,” says an American lawyer in Beijing. “It’s the same with s.” Adding to the dismal picture is a decline in foreign direct investment, which had kept lawyers busy dealing with screening requirements and official reviews.Other developments may also be affecting the calculations of foreign firms. Some lawyers worry about China’s increasingly stringent rules on data privacy and the transfer of information abroad. Those working on international deals often have to keep foreign regulatory bodies in the loop. But they risk running foul of the law in China if they provide those bodies with information about Chinese firms. “People are not crazy to worry that they could end up in big trouble,” says a foreign lawyer.In the past American law firms thought it good for their reputation to have a presence in China. “Now everyone is really down on the country and that’s no longer the case,” says an American lawyer. In some ways, though, the friction between China and America has actually increased transnational legal work. Business involving sanctions, tariffs and export controls is expected to grow under Donald Trump, who has promised a trade war with China. But lawyers say such work is better done in Washington, as opposed to Beijing.China’s law firms are not immune to the country’s economic woes. They have been lowering salaries and cutting staff. But the government helps them out. Many receive subsidies, and state-owned enterprises are encouraged to shun foreign firms.Some Chinese lawyers see the foreigners’ exit as a tacit acknowledgment that local firms are increasingly capable (and less expensive). During a lecture at Harvard University eight years ago, Tao Jingzhou, a French-trained Chinese arbitration lawyer, told the audience that “the golden age of foreign law firms in China” was coming to a close. Now that it is happening, he is sad to see his foreign friends go, but proud of his Chinese colleagues.
