Things are not looking good as foreign law firms in China and Hong Kong are letting go of their staff at a rapid pace.
It was reported that one company laid off at least 20 lawyers this year as China’s economic downturn and geopolitical tensions continue to squeeze business.
Lawyers and legal recruiters told Nikkei Asia that the redundancies highlight not only the downturn in the market but also the reliance of top international companies on Chinese activity.
More than a dozen partners from different firms said China-related business has started to dry up, and several said corporate Chinese clients are increasingly asking for lengthy payment delays.
London-headquartered firm Linklaters has let go of around 20 lawyers in Hong Kong. A spokesperson for the firm said the “modest reduction” was “in response to the prolonged downturn in the China market.”
China’s reopening did not provide the economic rebound many were expecting. Some headhunters have described the current job market in Hong Kong for lawyers as worse than in the aftermath of the global financial crisis fifteen years ago.
“During the global financial crises, starting around May 2009 deal flow came back very strong in Hong Kong, and associates there were billing very high hours through 2010, due to global hiring freezes causing significant understaffing,” said Evan Jowers, co-founder of legal recruitment company Jowers Vargas.
He described the situation as “totally different” today. “Deal flow is starting to improve in the West, but in Hong Kong the big law industry is in a continued deal flow crisis and without yet any signs of light at the end of the tunnel.”
According to a Hong Kong-based IPO lawyer for a UK firm, he said, “I think the impact on law firms in Asia is a lot more far-reaching than 2008 and the investors sentiment came back in a short period, but now people are even pessimistic about 2024.”
“International law firms that rode the wave on the back of China’s past two decades’ growth are now going through a down cycle. I am expecting more layoffs to come in Hong Kong and the mainland market. There’s no sign of a U-turn for the Chinese economy,” he said, predicting it could take up to two or three years for the market to revive.
One example is be US law firm Proskauer Rose which closed its mainland Chinese office and now maintains just one lawyer in its Hong Kong office, which opened in 2009. It previously had 16 lawyers in the city.
Another is Latham & Watkins, one of the world’s largest law firms by revenue, and Ropes & Gray, also both US, have downsized their China operations, Nikkei Asia reported earlier. Overall, foreign law firms’ representative offices in China dropped to 205 in 2022 from 244 in 2017.