The Fast-Fashion Giant Shein Had Set Big Goals. The Company, Known for Its Extremely Affordable Clothing, Had Made a Name for Itself Worldwide and Won Hundreds of Millions of Customers. In November, Shein Filed for an IPO in New York, Raising Expectations that It Would Be One of the Biggest IPOs in Recent Years.
Donald Tang, the US-based Executive Chairman of Shein, traveled across the country and met with politicians, hoping to convince them of his vision of Shein as exemplary in terms of compliance and transparency. However, the company is now caught up in the tensions between the US and China, and hopes for an IPO in New York have been dashed.
Shein was founded in 2012 in China but moved its headquarters to Singapore in 2021. The company collaborates with thousands of Chinese factories that produce new fashion styles daily. Services such as warehousing and back-office tasks are also handled in China. However, the largest market is the USA – Shein has never sold in China.
Washington Legislators Are Suspicious of Shein's Ties to China and Demand More Details on the Company's Supply Chain. Beijing Wants Shein and Other Companies with Significant Operations in China to Align with Its Own Messages. A Central Issue is Cotton – Not Just Where Shein Sources the Fabric, but Also How the Company Talks About It.
Shein has shifted its main listing efforts to London. An IPO application could be submitted there in the coming weeks, as reported by people familiar with the matter.
The growing rift between Beijing and Washington has been particularly evident in high-tech industries such as semiconductors and artificial intelligence - but no company is immune. Shein's challenges in satisfying both sides bode ill for other prominent companies with Chinese roots that are trying to gain a foothold in the USA.
In addition to the social video platform TikTok and the discount retailer Temu, Shein is one of the few large companies with Chinese roots that have carved out a successful niche among American consumers. All have been under heightened scrutiny in Washington. Last month, President Biden signed a law prohibiting TikTok unless its Chinese owner, ByteDance, sells it within a year.
Tang, Shein's Executive Chairman, has been the company's Western face since 2022. He has experience in taking companies public and connections in both the USA, where he has been living for four decades, and in China, where he was born. Since taking up his position at Shein last year, he has been working to establish the company as globally compliant.
Under his leadership, Shein has formed partnerships with Western brands like Forever 21 and has sought to diversify its supply chain beyond China. The company reported record sales and profits in 2023, as indicated in a letter to investors.
A major problem for Washington and Beijing is cotton. U.S. laws prohibit imports linked to Xinjiang, where Washington accuses Chinese authorities of using forced labor in the oppression of Uighurs, which Beijing denies. U.S. politicians are demanding assurances from Shein that the company does not use cotton from Xinjiang, which accounts for the majority of China's cotton production.
Shein has since made differing public statements. Last year, the company told the Wall Street Journal that it does not source cotton from Xinjiang or China. However, more recent statements leave out any mention of Xinjiang and merely emphasize a "zero tolerance" policy against forced labor.
Shein Has Not Fully Given Up on a US Listing, According to People Familiar with the Matter. However, Challenges Remain, Especially in a Geopolitically Tense Environment.
