Strategic Thoughts For 2025: The Red Queen Effect in Chinese Law Firms and Possible Solutions

Jeff Leong

These are some thoughts over the new year break on the impact of involutionary competition (内卷竞争) on Chinese law firms and potential solutions, drawing upon my experience as a law firm founder, crossborder lawyer and foreign related legal educator over some 30 years.

It is eerily similar to the challenges facing Malaysian law firms today.

The Red Queen Effect in Chinese Law Firms and Possible Solutions

The Talent War
Talent is the lifeblood of law firms. Top lawyers, with their expertise and client networks, are in high demand. Firms compete fiercely, offering higher salaries, better benefits, and more prestigious roles to attract and retain talent. But when one firm raises the bar, others must match or surpass it. The result is a talent war, where firms invest heavily in recruitment, only to see rivals do the same. Competition escalates, but relative positions remain unchanged.

The Pressure to Innovate
Technology is reshaping the legal industry. AI, big data, and blockchain are no longer futuristic concepts but tools to enhance efficiency and competitive edge. Firms that adopt these technologies gain an advantage—but only temporarily. Competitors quickly replicate or surpass these innovations, forcing firms to innovate again. This cycle of innovation and imitation embodies the Red Queen Effect: firms must run faster just to stay in place.

Client Expectations
Today’s clients demand more than legal expertise. They want efficiency, transparency, and value for money. Firms that deliver exceptional service set new standards, pushing others to follow. But as client expectations rise, so does the pressure on firms. The race to meet these demands is relentless, and firms that fall behind risk losing clients—or even their market position.

Geographic and Industry Expansion
As China’s economy grows, opportunities in new regions and industries emerge. Firms that enter emerging markets or focus on high-growth sectors gain a competitive edge—but only temporarily. Competitors soon follow, saturating the market and eroding first-mover advantages.

The Red Queen Effect ensures no firm can rest on its laurels; expansion is not a one-time effort but a continuous race.

Breaking the Cycle: Strategies for Chinese Law Firms

The Red Queen Effect is not a death sentence but a call to action.

To thrive in this competitive landscape, Chinese law firms must embrace strategic thinking and value-creating solutions.

Differentiation: Find Your Niche
In a crowded market, differentiation is key. Firms must identify their unique strengths—whether in specialized expertise, industry focus, or client service models—and build their brand around them. By carving out a niche, firms can escape the Red Queen race and create lasting value.

Innovation: Lead, Don’t Follow
True innovation is about setting the pace, not keeping up. Firms must invest in technology and processes that transform how legal services are delivered. This could mean developing proprietary tools, using AI for contract analysis, or creating real-time client portals. The goal is to set the standard, not just meet it.

Collaboration: Build Alliances
The Red Queen Effect thrives in isolation. By partnering with other firms, tech companies, or industry experts, firms can pool resources, share knowledge, and create synergies. Strategic alliances can help firms break free from the competitive spiral and achieve mutual growth.

Client-Centricity: Exceed Expectations
In a race where everyone is running, the firms that truly stand out are those that understand their clients. By focusing on client needs, anticipating challenges, and delivering tailored solutions, firms can build loyalty and rise above the crowd.

Culture: Foster Resilience and Adaptability
The Red Queen Effect demands resilience. Firms must cultivate a culture of adaptability, where lawyers and staff embrace change, learn new skills, and innovate continuously. A resilient culture is the foundation for long-term success.

Expanding Horizons: Cultivating Foreign Related Legal Talent and Supporting Chinese Businesses in Southeast Asia

As Chinese businesses expand into Southeast Asia, law firms must evolve to meet their needs. This requires not only expertise in foreign related law but also a deep understanding of regional markets and cultures.

Cultivating Foreign Related Legal Talent

  • Regional Recruitment: Attract lawyers with Southeast Asian experience, particularly those familiar with both Chinese business and the legal systems of key markets like Singapore, Indonesia, and Vietnam.
  • Ongoing Training: Provide continuous education in cross-border transactions, international arbitration, and regional compliance.
  • Leverage Overseas Chinese Lawyers: Tap into the expertise of overseas Chinese lawyers who understand both local markets and Chinese business practices.

Providing Legal Support for Chinese Businesses in Southeast Asia

  • Comprehensive Services: Offer one-stop solutions, from market entry strategies to local legal compliance and dispute resolution.
  • Industry Expertise: Develop deep expertise in sectors like technology, energy, and infrastructure, where Chinese businesses are expanding.
  • Risk Management: Help clients navigate political risks, sanctions, and regulatory challenges in Southeast Asian markets.

Choosing the Right Local Partners

  • Due Diligence: Carefully assess local firms’ capabilities, reputation, and cultural fit.
  • Strategic Alliances: Build long-term partnerships with local firms to provide seamless cross-border services.
  • Joint Ventures: Consider forming joint ventures or alliances with leading Southeast Asian firms to combine strengths and share resources.

Building a Global Network of Chinese Law Firms

  • Unite Overseas Chinese Lawyers: Collaborate with overseas Chinese lawyers to build a global network of legal expertise.
  • Leverage Cultural Bridges: Use the cultural and linguistic advantages of overseas Chinese lawyers to better serve Chinese businesses abroad.
  • Promote Chinese Law Firm Brands: Position Chinese firms as global leaders by showcasing their expertise, innovation, and commitment to excellence.

Conclusion: The Need for Strategic Thinking and Cross-Disciplinary Solutions

The Red Queen Effect is a powerful metaphor for the challenges facing Chinese law firms. In a fiercely competitive and rapidly changing market, firms cannot stand still. They must run faster, think smarter, and adapt quicker—not just to survive, but to thrive.

But running faster is not enough. To escape the Red Queen race, firms must embrace strategic thinking and cross-disciplinary solutions. They must differentiate, innovate boldly, collaborate widely, and remain steadfastly focused on client needs. Only then can they turn the Red Queen Effect from a threat into an opportunity and secure their place in the future of China’s legal industry.

The race has begun. The question is not whether to run, but how to run smarter.

For Chinese law firms, the time to act is now. By cultivating foreign related legal talent, supporting Chinese businesses in Southeast Asia, and building a network of overseas Chinese lawyers, firms can not only survive the Red Queen Effect but also lead the globalization of China’s legal industry.

#lawyers #lawfirms #Malaysia #China #RedQueenEffect #law #lawfirmstrategy #BRI #RCEP #BRICS #Asean

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Published by Jeff Leong

I am the senior partner of Messrs Jeff Leong, Poon & Wong, Malaysia. I am also serving with the Law Association For Asia And The Pacific (LAWASIA), the peak body for national bar associations and law societies in more than 40 jurisdictions in the Asia Pacific region as Chair of the Corporate, Securities & Investment Law and Co Chair of the Belt And Road Initiative Standing Committees. I lead a Special Projects team, structure and run complex M&A deals, resolve critical problems faced by clients such as crisis management, regulatory investigations, shareholder fights and board tussles and advise founders, business owners and senior management on business transactions. With numerous IPOs and M&A deals over 30 years, I am often consulted by clients in Shipping and Logistics, Technology and Digital Economy, Oil & Gas and other heavily regulated industries on complex, urgent and critical matters. I have been included on Asia Business Law Journal’s A List of Malaysia’s Top 100 Lawyers and Legal 500’s Hall of Fame for Corporate and M&A for Malaysia. I am an accredited Mediator of the Malaysian Mediation Centre, the International Commercial Mediation Centre For the Belt And Road Initiative, Benchmark Chambers International & Benchmark International Mediation Centre, Shenzhen Qianhai International Commercial Mediation Centre, CCPIT/CCOIC Hangzhou Mediation Centre and Hainan International Arbitration Court. I founded JLPW in 1999 during the 1997 Asian Financial Crisis with 2 other founders. We were deep into corporate rescues and mergers of banks, insurance companies and stockbrokers to resuscitate the bleeding Malaysian economy, working on some of the major corporate rescues of the 1997 Asian Financial Crisis. Affiliations with Deacons Graham & James 2001- 2012 and Dacheng (now Dentons China) 2012-2016 quickly followed. In 2012, we founded JLPW CROSSBORDER ASIA, a regional law firm network. In JLPW, we developed the current due diligence system adopted and used by industry participants in capital markets transactions in 1999. I assisted the review of the 2020 Due Diligence Guide for Malaysia with investment bankers, accountants, capital market lawyers and other industry participants. I currently lead our Japan Services Group, assisting Japanese companies venturing into Malaysia and South East Asia with market entry strategies, M&As and post merger integration advisory together with our Japanese speaking team. I am also leading our China Services Group and regional JLPW Belt and Road Services Group assisting Chinese companies investing and undertaking Belt and Road projects in Malaysia and other ASEAN countries. As leader, strategist, chief talent scout, builder and problem solver, I have initiated and developed various practice groups in JLPW and am now leading our Legal Tech initiatives to better support our clients in the new Digital Economy.

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