US legal industry's China retreat gained steam in 2024

By Sara Merken

Dec 26 (Reuters) - Major U.S. law firms scaled back from Greater China's legal market at a rapid pace in 2024, highlighting an uncertain future for foreign firms in the world's second largest economy.

At least 11 U.S. firms closed or said they would shutter offices in Shanghai, Beijing and Hong Kong this year amid muted deal activity, geopolitical tensions and growing pressures on foreign businesses.

U.S. President-elect Donald Trump has vowed to impose additional 10% tariffs on Chinese imports, which could further worsen relations with Beijing.

In the weeks before and after the U.S. election, large law firms including Milbank; Paul, Weiss, Rifkind, Wharton & Garrison; Wilmer Cutler Pickering Hale and Dorr and Skadden, Arps, Slate, Meagher & Flom announced office closures in Beijing or Shanghai.

The exits started several years ago but accelerated in 2024, said Peter Zeughauser, a California-based law firm consultant who does work in China.

Zeughauser said he anticipates more departures next year but believes 2024 will "be viewed as a watershed year" where the exits hit a peak. He said there are still firms that have no intention of pulling out.

Sidley Austin; Reed Smith; Perkins Coie; Dechert; Morrison & Foerster; Weil Gotshal & Manges and Orrick, Herrington & Sutcliffe are among the other firms that have said they would shutter China offices in 2024. Mayer Brown separated from its existing Hong Kong operations this year, launching a new operation with fewer lawyers while the majority of the team reestablished as an independent firm.

Some firms have left China entirely, while others have consolidated their operations in one or two locations, particularly Hong Kong. In some office closures, there were only a few lawyers based in the outpost.

The firms have all said they remain committed to serving clients in the region through other offices in China or in markets such as Singapore, Tokyo and Seoul.

Out of the 200 highest-grossing U.S. law firms, 60 had offices in Beijing, Shanghai or both between December 2023 and December 2024, according to data provided by Leopard Solutions, which tracks law firm hiring. Of those 60 firms, 35 reduced their headcount by some amount in the same period by shedding lawyers or closing offices, and most of the largest U.S. firms in Hong Kong also decreased headcount, the data showed.

The figures do not include all of the firms that announced office closures last year.

Other U.S. firms have grown their presence in China this year or have maintained offices with dozens of lawyers.

Los Angeles-founded Loeb & Loeb, for example, in September added a group of 17 lawyers, paralegals and IP specialists in Beijing from Perkins Coie, which had just announced it would close its office there. Loeb & Loeb also gained control of Perkins Coie's IP agency in Beijing.

In March 2023, Quinn Emanuel Urquhart & Sullivan opened a Beijing office. The firm also has outposts in Shanghai and Hong Kong.

Read more:

US law firms rethink China future amid economic woes, data crackdown

(Reporting by Sara Merken)