Outfit at Shein headquarters in Singapore on June 19, 2023.
Ole Huiin | Bloomberg | Getty Images
China’s powerful internet regulator is conducting a safety investigation into Shein, CNBC reported, as the fast fashion giant prepares for its long-awaited U.S. initial public offering.
The Cyberspace Administration of China is investigating Shein’s supply chain presence in the country, where the majority of its manufacturers and suppliers are based, people familiar with the matter told CNBC.
The Wall Street Journal reports that the review focuses on how Shine handles information about its employees, partners and suppliers in the region. The CAC is also considering whether Shein can ensure the data is not leaked overseas, the publication said.
CNBC reached out to the China Cyberspace Administration and Shein, but has not yet received a response.
CNBC previously reported that the overhaul poses some problems for the company as it moves toward an IPO after secretly filing for an initial public offering in the U.S. in November. There is.
First, it positions Shine squarely as a Chinese company, at least in China’s eyes, at a time when relations between Washington, D.C. and the Chinese government are increasingly strained. As lawmakers on both sides of the aisle have expressed concerns about its ties to the region, Shein has worked hard to portray itself as a global company founded in China.
Drew Bernstein, co-chairman of Markham Asia and an expert on U.S. and Asian capital markets, said if Shein was not a Chinese company, the retailer would not necessarily need permission from the Chinese government to go public. .
U.S. regulators are increasingly concerned about Chinese companies doing business in the U.S. and want to ensure that sensitive data of U.S. customers does not fall into the hands of the Chinese government.
The Chinese government has similar concerns. Not only does Schein need to convince U.S. regulators; We must secure China’s blessings.
In 2021, the Chinese government launched a similar safety review of ride-hailing giant Didi Chuxing, days after it went public on the New York Stock Exchange and raised about $4.4 billion. Within a year, the company was delisted, wiping out shareholder value.
Following Didi’s downfall, all Chinese companies seeking overseas IPOs are now subject to safety reviews and approval from the Chinese government. If the review turns up information unfavorable to Chinese regulators, the deal could be scrapped.
But in contrast to Didi, Shein is seeking Chinese approval before starting trading in the U.S., which could help prevent a similar stock price collapse and boost investor confidence. Yes, said Bernstein, who works with Chinese companies listed on the U.S. stock market.
Bernstein said that although Shein had previously moved its headquarters to Singapore and does not sell products in China, the company is concerned that this could lead to information about Chinese customers being leaked to the United States. It was pointed out that this could be reduced.
“If you have zero contact with Chinese consumers, you are unlikely to be considered a security-sensitive company,” Bernstein said. “I think so [Shein] We anticipated this and are well prepared.”
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