Hong Kong: an anxious wait for recovery
Dominic Carman
As US law firms leave Greater China, the jury is still out on whether Beijing’s $1.4trn stimulus package will lead to a sustained Hong Kong recovery
“Hong Kong has been locked in a bad news cycle with very little to be enthusiastic about: deal flow is down; the HKSE, although recently up, has had a disastrous few years; the China stimulus package (announced in September 2024) initially led to a big rebound – then everyone realised that it completely lacked detail and structure, so it fell flat.” This critique from the Managing Partner of Harneys Hong Kong office, Paul Sephton, is brutally frank and unambiguously accurate. Benchmark the Hang Seng Index (HSI) against its international peers and it is immediately apparent just how difficult things have become for Hong Kong. In the five years to mid-December 2024, the HSI was down by 29%. Over the same time period, other major indices have pointed in the opposite direction: the FTSE100, up by 9%; the Euronext 100, up by 27%; the DJIA, up by 54%; and the NASDAQ, up by a remarkable 156%.
It is therefore unsurprising that lawyer headcount at the Hong Kong offices of onshore firms has also been falling. This is particularly notable among US firms: Skadden is prominent among those which have substantially reduced their footprint, while Dechert and Winston & Strawn have closed altogether. Mayer Brown has reduced to just 20 local lawyers, having hived off 120 lawyers to JSM, which has reverted to being Johnson Stokes & Master – the name of the Hong Kong firm that merged with Mayer Brown in 2008. The gradual decline of international law firm offices, which began in 2017, has now accelerated across the board. Since mid-2023, the 20 largest international firms have cut more than 7% of their Hong Kong-registered lawyers. Over the border, things look even bleaker. Paul Weiss, one of the first US firms to arrive in China in 1981 and now busily expanding its London footprint, decided to close its Beijing office in early December 2024. A week later, Milbank, which opened its Hong Kong office in 1977, followed suit by announcing the closure of its Beijing office, which has been in operation for 18 years. It was the 14th closure announcement by a US law firm in 2024. Such decisions are symptomatic of Hong Kong’s biggest problem – in a word: China.
