Dentons, one of the largest international law firms in the world, has parted ways with its Chinese unit, Dacheng, as Beijing tightens regulations for international companies.

In a memo prepared on 7 August, Dentons informed clients of the change to the relationship with Dacheng.

“In response to recent Chinese government mandates on Chinese law firms, including those relating to cybersecurity and data protection, Dentons is modifying its relationship with Beijing Dacheng Law Offices, the Chinese legal partnership that has been a member of the Dentons Group since 2015,” read a statement by Dentons.

“Moving forward, Beijing Dacheng Law Offices will operate as a separate, standalone law firm that will serve as Dentons’ preferred law firm for clients with legal needs in China,” the statement continued.

Beijing Dacheng Law Offices will also join the Nextlaw Referral Network, according to a Dentons’ spokesperson.

“This means we can continue to collaborate on serving clients both in China and across the rest of the world,” said the spokesperson. “We expect the implementation of this agreement will be seamless for clients, including those with ongoing cross-regional matters involving the China region.”

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Dentons’ Hong Kong practice will remain an integrated part of the firm with no change to its relationship, the spokesperson added.

Dentons merged with Dacheng in 2015 to create the world’s largest law firm.

However, its retreat from China coincides with a tightening regulatory environment in the country that is spooking foreign companies.

In April, Chinese lawmakers amended the country’s counter-espionage law, which includes documents, data, materials or articles relating to national security and interests. The amendment also widened the definition of spying. The updated legislation came into force on 1 July.

In March, Chinese authorities raided the Beijing office of Mintz Group, a US due diligence firm. Five Chinese employees were detained for further questioning and the office was shut down. Similarly, Chinese police questioned employees at US consultancy Bain & Company’s Beijing office in April.

In February, Investment Monitor noted that foreign investment into China is down across all sectors. The sectors that witnessed the biggest decline include financial, business and professional services.