In Depth: The Changing Landscape of Foreign Law Firms in China

Foreign law firms have historically played a pivotal role in China’s economic transformation, assisting foreign investors with market entry and helping to supply China with needed capital and professional expertise during the country’s four-decade-long reform period [para. 1][para. 2]. However, recent years have seen a shift due to global trade tensions and changing business priorities, marked by a retreat of American firms on the Chinese mainland and increasing activity by Southeast Asian firms guiding Chinese outbound investment into their regions [para. 3].

Since 2023, over a dozen prominent foreign law firms—mostly American—have scaled back or closed their mainland China offices, though many retain a presence in Hong Kong and focus on consolidating rather than withdrawing entirely [para. 4]. For instance, Paul, Weiss, Rifkind, Wharton & Garrison LLP, one of the earliest entrants in 1981, closed its Beijing office in late 2024 [para. 5][para. 6]. Foreign law firms initially operated as consultants, assisting clients with China's regulatory environment, until regulations in 1992 allowed formal legal offices for foreign firms, albeit with restrictions on practicing Chinese law [para. 7][para. 8][para. 9]. Following China’s WTO accession in 2001, these restrictions on geographic scope and office numbers were loosened, leading to more than a doubling of foreign law offices in China over the next decade [para. 10][para. 11][para. 12][para. 13].

However, a turning point occurred during the Trump presidency: between 2017 and 2022, foreign law firm representative offices fell from 244 to 205, mainly due to U.S. firms’ closures, though there was a minor rebound to 208 in 2023 [para. 14][para. 15]. Notably, Dentons ended its alliance with Beijing Dacheng Law Offices in 2023, and Mayer Brown restructured its Hong Kong operations in 2024, pointing to ongoing industry shifts and strategy realignments [para. 16][para. 17]. Yet, some U.S. firms are expanding locally—Loeb & Loeb acquired a Beijing-based team from Perkins Coie in 2024, and Dorsey & Whitney has more than doubled its Beijing headcount since 2021, signaling continued confidence in the Chinese market by some actors [para. 18][para. 19][para. 20].

Meanwhile, since 2023, China has approved 15 new foreign law firm representative offices, featuring significant participation from British, Singaporean, Malaysian, Vietnamese, Cypriot, and Mauritian firms. Seven set up in Shenzhen, reflecting a broader pattern of Southeast Asian firms positioning themselves close to Chinese clients as China's outbound investment in the region grows [para. 21][para. 22][para. 23].

Industry experts note a transformation stemming from the rising competitiveness of Chinese companies and decreased inbound investment from U.S. multinationals, partly due to geopolitics. This has resulted in shrinking business for foreign law firms, while the slowing pace of Chinese IPOs in the U.S. and increased regulatory scrutiny—particularly following Didi’s 2021 listing and subsequent $1.2 billion fine—have further constrained opportunities. Revised cybersecurity rules require stricter data security vetting for companies with over 1 million users seeking overseas listings [para. 24][para. 25][para. 26][para. 27][para. 28][para. 29][para. 30].

Chinese law firms now match or surpass foreign firms in quality and cost-effectiveness, intensifying competition. Cost pressures are acute for foreign firms, given significantly higher salaries (a first-year associate at a U.S. firm typically earns $200,000, 8-10 times that of a Chinese counterpart), and legal fees for U.S. listings have fallen by more than half for some services [para. 31][para. 32][para. 33][para. 34][para. 35].

The growing demand is now in cross-border dispute resolution, trade, bankruptcy, intellectual property, data security, and new energy and AI sectors. While the Chinese legal market is evolving rapidly, domestically-owned firms are expanding and internationalizing, but experts believe foreign firms with adaptability and high-quality, locally attuned services still have strong growth potential [para. 36][para. 37][para. 38][para. 39].