Shein’s ‘Made in China’ label clashes with IPO

Cosmetic makeover. Fast-fashion phenom Shein just can’t seem to shake off its Chinese stripes. The retailer, which confidentially filed for a New York initial public offering last year, is seeking Beijing’s nod to go public, sources told Reuters. Whatever the regulator’s decision, it’ll set a tricky precedent for ByteDance’s TikTok and others.

Shein was founded in China a decade ago but has painstakingly portrayed itself as an international company. In late 2021, it moved its headquarters to Singapore; founder and CEO Chris Xu has also become a permanent resident in the city-state, per Reuters. The hugely popular app doesn’t sell to the Chinese market. Still, Shein relies primarily on thousands of third-party contract manufacturers in the People’s Republic. That may be enough for the country’s stock market regulator to decide it is subject to Chinese listing rules.

The news is a huge setback for Shein’s much-anticipated listing. Global investors have turned sour on Chinese equities as unpredictable regulations batter valuations. E-commerce giant Alibaba, for instance, trades on around 7 times forecast next-12 month earnings, LSEG data show, versus over 20 times three years ago. If Shein, which Bloomberg says is targeting a $90 billion valuation, is fair game to Chinese regulators, its price tag may take a hit. Moreover, this opens the question of how vulnerable multinational firms with huge supply chains in China, from Walmart to Tesla, are.

Other China-linked companies will be paying attention too. PDD, which operates rival shopping app Temu moved its China headquarters to Ireland; video-app TikTok, facing scrutiny in Washington over ties to its Chinese parent, also shifted its headquarters to Singapore and Los Angeles. Shein is showing these cosmetic makeovers are only such.