Never before: foreign firms dwindle in China

October 6, 2015 For the first time since mainland China opened its borders to allow foreign firms to enter its markets, the number of foreign firms operating there has dropped. China first opened its borders in 1992. The drop is marginal, down from the previous years 178 foreign firms with 232 offices to this years 170 foreign firms with 225 offices, as reported by the country's Ministry of Justice.

The statistical shift likely is the result of two main factors – mergers or firm closures and shifts in strategy for some firms, leading to withdrawals or office closures.

Some mergers that had an impact included Australian firm Allens' merger and legacy Mallesons Stephen Jacques, which merged with Chinese firm King & Wood. Both firms closed their offices as a result. Former firm Bingham McCutchen went out of business and its lawyers all moved to Morgan Lewis & Bockius.

Other firms that pulled out of China for non-financial reasons included Fried Frank Harris Shriver & Jacobson, Chadbourne & Parke, Vinge and Duarte Garcia Caselli Guimarães e Terra Advogados.

Strategically, some firms are moving in the direction of establishing local alliances in favor of an operations base there. Stephenson Harwood closed an office in Guangzhou in favor of an alliance with local firm Wei Tu. Kennedys began with an alliance in Beijing rather than opening its own office there.

Still, these shifts are not an absolute trend, with some firms entering China for the first time last year, such as Alston & Bird.

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