Dentons, the largest western law firm in China by staff, is hiving off its operation in the country in response to Beijing’s intensifying regulation, which has hit foreign companies.The firm informed clients on Monday it was making the move due to the “evolving regulatory environment for Chinese law firms”, including new requirements “relating to data privacy, cyber security, capital control and governance”.

The decision by Dentons comes amid worsening prospects for foreign companies in the country as the Chinese government expands cyber security and data protection laws on national security grounds. China broadened its anti-espionage laws in April to cover any “documents, data, materials or items related to national security and interests”.

Lawyers for Dacheng, the firm in China, will operate within a completely separate entity to which Dentons will refer clients, Dentons said.