Covid-19 continues to hog the headlines as Hong Kong edges along in reducing social distancing rules and China moves more boldly towards returning its cities to normality. Every day seems to bring further news of international firms instigating cost-cutting measures and, officially or unofficially, freezing all hiring globally even as Asia looks to weather the storm. Unsurprisingly the retail and F&B industries seem to have been the hardest hit due to a near-total lack of foot traffic and this wave of uncertainty seems to have spread to other markets. However, unlike the financial crisis of 2008, funding of investments should not be an issue in theory and firms report an uptick in client activity.
That being said, two UK firms have announced regional closures with national firm Osborne Clarke planning to cease operations in Hong Kong at the end of June while Stephenson Harwood will close their Beijing office and refocus their Hong Kong office on their core specialisms of corporate M&A, asset finance, litigation and private client.
Although the market downturn as a result of the pandemic cannot have helped, it’s unreasonable to ascribe the closures to such a recent market development. Perhaps the additional stress on billings was the straw that broke the camel’s back but both point to longer term issues.
Stephenson Harwood opened in Beijing in 2013 and had made the hire of an established Beijing partner something of a priority, culminating in the recruitment of Allen Shyu and his team in 2018 from the Atlanta-headquartered Troutman Sanders, itself having recently announced the closure of its four-office Asia network. The firm had also for some time been keen to extend its US capability in the region and Shyu’s practice brought them that but the experiment was short-lived, with Shyu joining Akin Gump after almost exactly a year. Osborne Clarke had taken aim at the regional TMT market, a recognised strength of the firm in the UK, but just over a year after formalizing their relationship with local partner firm Koh & Vass the decision was taken that priorities lay elsewhere, with Singapore and Shanghai remaining as the firm’s Asian outposts. As with Orrick, pulling out of Hong Kong seems not to be the end of the firm’s commitment to the region.
Another confirmed withdrawal from Beijing is Vinson & Elkins, the oil & gas giant seemingly unwilling to rebuild in the region following the departure of Xiao Yong, formerly head of the China practice, and his team to Dechert in 2017. The firm retains an office in Hong Kong and it will be interesting to see what strategy the firm takes going forward in the market.
This all comes against a backdrop of the steady emergence of the “Red Circle”, as PRC firms extend their reach on the mainland and in Hong Kong, actively recruiting at the senior end and laying down a marker for their international competitors. As another UK firm Mishcon de Reya announced its opening in Singapore, focusing again on the high-net-worth client base, for now at least the focus of Western firms in Asia seems to be drifting south.
Contributor: Sam Kenworthy