 "Amid Trump's tariff war, US law firms shut shop in China with bleak investment outlook")
One of the first Western law firms to enter China following President Deng Xiaoping’s economic reforms starting in 1978, the New York-based Paul Weiss, has decided to shut shop in China.
In the wake of US President-elect Donald Trump’s pledge to ramp up the trade war with China, the inbound investment outlook is weak and interest in mergers and acquisitions in China among foreigners has declined . As a result, US law firms are exiting the market they had once been eager to seek.
In a statement to media, the Paul Weiss said, “We will close our Beijing office at the end of the year. We remain committed to having a strong presence across Asia, including in Hong Kong and Tokyo, and will continue to provide the highest-quality service to our clients in all of our global offices.”
Trump has promised to impose blanket tariff of 60 per cent on all Chinese imports on top of existing levies. On top this, Trump has also pledged to impose 10 per cent tariff as a punishment for Chinese drugs fuelling the addiction epidemic in the United States. He is also expected to ramp up outgoing President Joe Biden’s hawkish policy of curtailing China’s technology sector, particularly the semiconductor and information technology segments.
Law firms’ exodus from China ahead of Trump 2.0
The Paul Weiss —full name Paul, Weiss, Rifkind, Wharton & Garrison— is at least the 13th US law firm to exit China in 2024, according to Asian Legal Business.
The firm announced on Tuesday that it is closing its office in Beijing by the end of the year. The firm has more than 1,000 lawyers globally and its Beijing office was focussed on mergers and acquisitions (M&A), private equity (PE) investments, foreign direct investment (FDI), and corporate work, among other areas.
Impact Shorts
More ShortsThree years after Deng, the Chinese leader at the time, opened the country’s economy that paved the way for its economic rise, Paul Weiss opened office in Beijing in 1981. While law firms once sought the Chinese market to make the most of the sociopolitical reforms and economic boom, they have been exiting lately over geopolitical tensions, repression by the Communist regime, muted investor sentiment, and trade conflicts.
In October alone, two firms announced scaling down of operations in China. Wilmer Cutler Pickering Hale and Dorr announced it would close its office in Beijing and Skadden, Arps, Slate, Meagher & Flom referred to “shifting market dynamics” to announce the closure of its office in Shanghai.
Similarly, Reed Smith, Perkins Coie, Dechert, Morrison Foerster, and Sidley Austin have announced closure of offices in Shanghai, Beijing, or Hong Kong this year.
Trump 2.0 to disrupt Chinese business, say analysts
Following 2017, when Trump first came to power, the foreigners’ interest in China has consistently fallen.
Now, as Trump has promised to up the ante , the market anticipates more disruption for US-China business.
“As the Trump 2.0 Cabinet and policies take shape, the market anticipates further negative impact and disruption to global and US-China business flows,” said Nicholas Chen, Managing Partner with Pamir Law Group, to South China Morning Post.
Chen further said, “The anticipated US tariffs and economic targeting of Chinese will increasingly and directly hurt US supply chains and consumers. This in turn hurts US service providers like law firms in China.”
Andrew Collier, a China analyst with economic research firm GlobalSource Partners, told SCMP that firms may also worry that their lawyers would be detained for representing foreign clients in “squabbles” with local peers.
Joe Simone, a partner with Simone Intellectual Property Services in Hong Kong, indicated that foreigners no longer see China as a place where they can make money.
“I don’t see a big turning of the corner in terms of investment and trade. If they don’t see China as a place to make money, then what’s the point?" said Simone to SCMP.
Trump’s tariffs have a potential to hurt Chinese economy badly, which has already been struggling with sluggish growth this year. Investment and financial services firm UBS has said in analysis that China could lose up to 2.5 per cent of GDP if the United States imposes 60 per cent tariffs on all Chinese imports.
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