Shein’s Ownership: Still Chinese

What country is Shein from? The online fast fashion giant, headquartered in Singapore, is expected to be listed on the London Stock Exchange in the coming months.

Chinese offer is sweeping the West

Earlier this year, Donald Tang, its executive chairman, said the company was “American” because of its values ​​and because it gets most of its revenue from their business in the United States. In addition, the majority of Shein’s employees are in China, where the company was founded in 2012. All this could be said to be a multinational organization. the Shein does not depend on any country. Unfortunately, the situation cannot be so simple for a company that straddles China and the West. Shein is part of a new generation of innovative Chinese companies that have influenced rich countries.

“Shein now represents half of fast fashion sales in the United States and is expected to sell approximately $50 billion worth of clothing and accessories worldwide this year. “

It now represents half of sales fast fashion in the United States and is expected to sell for around $50 billion [47,8 milliards d’euros] of blouses, skirts and other clothing and accessories worldwide this year, up from about $32 billion [30,6 milliards d’euros] in 2023. That’s about as much as H&M and Zarathe two largest fast fashion brands in the West, together. Temu, an overseas subsidiary of Pinduoduo, a Chinese e-commerce company, has seen similar success. About 170 million Americans use TikTok, a video sharing app controlled by ByteDance, a Chinese technology company. Chinese companies operating in sectors ranging from games to electric vehicles have also made significant inroads into Western markets.

Under the watchful eye of American rulers

Consumers in rich countries were attracted by these new offers. Their enthusiasm, however, is not shared by their governments, who fear that Chinese companies could steal the data of their citizens or undermine national security. Last year, the United States passed a law that forced ByteDance to sell TikTok or leave the country (but it seems uncertain under Donald Trump, who has said he opposes it).

“Consumers in rich countries are being fooled by these new offers. Their commitment, however, is not shared by their governments”

US lawmakers are currently investigating Shein and Temu over allegations of forced labor in their supply chains (which the companies deny). In September, the US government said it planned to remove a trade rule that exempts imports worth less than $800 from tariffs, which would hurt both companies. At the same time, Chinese authorities are increasingly wary of these global trotting companies, fearing they will leak sensitive information to foreign competitors or escape the clutches of the Communist Party.

Shein tries to cut the cord

In response, many Chinese multinationals are reducing their ties to their home country. On November 14, BeiGene, a drugmaker with a name nod to the Chinese capital, announced that it would be renaming itself BeOne Medicines. Hundreds of Chinese companies, like Shein, have moved their headquarters to Singapore. But Shein has gone further than most in its efforts to be seen as a global company rather than a Chinese company. It does not sell its products in China (where it is called Xiyin) and is trying to be more like any other global company that comes from the country. But his journey shows how difficult it is for companies born in China to cut the cord.

“Hundreds of Chinese companies, like Shein, have moved their headquarters to Singapore. But Shein has gone above and beyond in its efforts to be seen as a global company rather than a Chinese company.

Let’s first consider Shein’s operational footprint. About 10,000 of its 16,000 employees were based in China at the end of last year, according to the company’s regulatory filings. This is partly because Shein relies heavily on Chinese factories. The company’s former headquarters in Guangzhou, which remains the largest office complex worldwide with nearly 5,000 employees, focuses primarily on logistics and supplier relationship management. In a nearby area called “Shein Village,” tens of thousands of people work in factories making clothes for the company (which does not employ them directly). The Guangzhou offices are unique; a logo does not recognize its primary occupant. When your correspondent visited last month, the only sign of Shein’s presence was a large cake-shaped balloon in the lobby to celebrate the company’s 12th anniversary.

Strategic activities in China

Shein’s presence in China is not limited to its supply chain and management. The company’s ability to use data to develop algorithms capable of accurately predicting consumer demand has been central to its success. Most of this work is still being done in China. According to a consultant familiar with the company, it would be very difficult to maintain or move the workers needed for these jobs.

“Overseas IPOs of Chinese companies have fallen in recent years as the Chinese government has expressed disapproval”

In Nanjing, the city where the company was founded, executives are working on their brand strategy. In some documents, Shein still refers to his office in Nanjing as the “global operations center.” Two of its Shanghai subsidiaries, which between them employed around 500 people at the end of last year, will work on product design, digital marketing and relationship management with paid TikTok influencers to advertise for the company. In addition, Shein’s footprint in the country is expanding. Last month, the company hired nearly 1,900 positions in 13 Chinese cities, including Shenzhen and Shanghai, where it strengthened its data management team. processing and develop their algorithms.

The listing abroad that Shein proposes is a second picture of his difficult situation. Overseas IPOs of Chinese companies have fallen in recent years as China’s government has been disaffected, including forcing ride-hailing company DiDi to exit the US in 2022. Chinese companies have raised a record $53 billion. [50,4 milliards d’euros] through overseas listings in 2014, according to LSEG, a financial markets and infrastructure data provider and owner of the London Stock Exchange. This year, they raised less than $5 billion [4,8 milliards d’euros].

Under pressure from the Chinese authorities

Shein may have hoped that by removing China’s domestic market, the overseas IPO would not be so scrutinized by China. In fact, companies with fewer than 1 million Chinese online users do not need to be reviewed by the country’s cybersecurity administration before listing their shares on foreign exchanges. Shein has also been careful to be careful in China. Xu Yangtian, its founder and CEO, avoided interviews with the media; there aren’t many photos online of this 40-year-old billionaire. The company’s reluctance to move its operations abroad may also be a sign of their fear of displeasing the Chinese government. A person close to the company says that Chinese authorities are monitoring the digital jobs they are doing in the country and those who have moved abroad.

“The company’s reluctance to move operations overseas may also be a sign of their fear of incurring the displeasure of the Chinese government”

Despite everything, Shein was not spared from Beijing’s scrutiny. According to the Wall Street Journal, the country’s cybersecurity agency has launched a review of how the company manages data related to suppliers and logistics in China, and Shein had to approve request from the Chinese government to set up operations abroad. The murky, unofficial process it must now follow highlights the “inherent political risks” investors must consider when evaluating the company, says Drew Bernstein of the accounting firm. MarcumAsia.

China in the eyes of investors

Growing concerns about these risks have contributed to the downward revision of Shein’s valuation over the past two years. In 2022, in a funding round that included General Atlantic and Tiger Global, two American private equity firms, Shein was valued at around $100 billion. [95,2 milliards d’euros]. Last year it was only valued at $66 billion [63 milliards d’euros]and sales of unregistered shares made at the beginning of the year would have brought it to less than $50 billion [47,6 milliards d’euros]. Shein’s establishment in China has helped the company develop an innovative service that will benefit millions of customers worldwide, regardless of their nationality. But while Washington and Beijing consider it Chinese, investors may have to do the same.

The Economist