As the domestic Internet e-commerce industry enters the stock era, globalization has become an inevitable choice for giant enterprises. However, due to cultural, political, and economic differences between China and other countries, Chinese enterprises face numerous challenges in their overseas expansion.

Particularly, under the influence of the "decoupling and disengagement" strategy led by the United States, some Chinese enterprises have stumbled in their overseas market deployments. A prime example is the cross-border fast fashion giant SHEIN, which, despite being an early player in cross-border e-commerce, still struggles with the constraints of the overseas market environment.

A notable example is SHEIN's ongoing struggle to go public. After several failed attempts, SHEIN turned to London for an IPO. However, its poor performance during a recent UK Parliament inquiry, which included accusations of ignoring UK parliamentarians and disregarding the UK Parliament, may hinder its planned London listing in the first quarter of 2025.

Furthermore, media outlets have reported that the European Commission is considering imposing a new tax on e-commerce platform revenues and an administrative processing fee on each product, specifically targeting SHEIN's cross-border e-commerce platform business model.

It is evident that SHEIN's overseas development may not be as smooth as its listing path. As a representative of Chinese enterprises going global, the challenges SHEIN faces in the capital market are merely a microcosm of the globalization struggles faced by Chinese enterprises.

The rocky path to listing highlights the numerous "localization" challenges faced by Chinese enterprises.

According to media reports, SHEIN originally planned to go public in London in the first quarter of 2025 and is currently awaiting approval from UK financial regulatory authorities.

The Financial Times and other media outlets reported that the focus of the UK Parliament's inquiry was on the transparency of SHEIN's supply chain and whether its labor rights comply with UK and international labor standards. However, SHEIN's representatives were evasive during the inquiry.

Yinan Zhu, SHEIN's General Counsel for Europe, the Middle East, and Africa, refused to answer key questions during the hearing, including the origin of cotton used in some products, the presence of forced labor, and plans for a London listing in 2025. Citing authority limitations, SHEIN's representatives' evasive attitude angered the inquiring parliamentarians, who felt disregarded.

Liam Byrne, chair of the parliamentary committee panel, bluntly stated: "For a company seeking to list in London, the committee is shocked by the lack of evidence you provided today. You have little confidence in the integrity of your supply chain, and you can't even tell us what the products are made of or much about workers' conditions. Your unwillingness to answer basic questions borders on contempt for the committee."

This confrontational inquiry may directly affect SHEIN's London IPO progress. Notably, SHEIN has previously attempted to list in Hong Kong and the United States, encountering numerous obstacles.

In fact, the challenge of local compliance has always existed for Chinese enterprises going global. Even though SHEIN has distanced itself from China through various means, the challenges during globalization remain unabated.

Yinan Zhu stated that SHEIN hopes to respond in writing. Regarding forced labor, SHEIN previously told the media that it adopts a "zero-tolerance policy" and that most of its cotton comes from Australia and the United States. SHEIN also insisted to the committee that it complies with relevant laws in its operating markets.

However, these statements may only be one-sided, and it remains uncertain how the UK Parliament and London Stock Exchange will treat SHEIN next.

SHEIN's challenges are just the tip of the iceberg for Chinese enterprises facing globalization obstacles. Even cross-border e-commerce platforms similar to SHEIN and overseas short video platforms have faced decoupling and suppression by the United States and other countries.

SHEIN's once smooth overseas development has now turned into difficulties, and the reasons are obvious.

From a capital perspective, SHEIN missed the wave of market growth and the best opportunity to go public. The capital market has been rapidly changing, with increasing thresholds and tightening policies for A-share IPOs, unsuccessful attempts to switch to Hong Kong stocks, and a regression in Chinese asset valuations across A-shares, Hong Kong stocks, and US stocks.

Moreover, affected by local market laws and regulations, SHEIN has been involved in various legal disputes, including supplier liens, theft of commercial information, and threats to small and medium-sized merchants, complicating its success in the capital market. Additionally, continuous tariff increases by European and American countries have challenged SHEIN's profitability and survival space.

Behind SHEIN's "de-sinicization" efforts, Chinese enterprises face a life-or-death test when going global.

To further develop its overseas market, despite obstacles, seeking listing remains SHEIN's best choice. In pursuing overseas listing, SHEIN has been accelerating its "de-sinicization." The main reason for this is to facilitate listing, especially in the United States.

However, the first challenge for a US listing is SHEIN's supply chain. Reuters reported that SHEIN will not use Chinese cotton for products sold in the United States in the future.

Media reports stated that written evidence submitted by SHEIN to the UK Parliament showed that for its largest market, the United States, SHEIN requires manufacturers to source cotton only from approved regions, including Australia, Brazil, India, the United States, and, in "limited circumstances," certain countries in Europe, the Middle East, Africa, and Southeast Asia, but not China.

SHEIN's adjustment of the supply chain to reduce dependence on Chinese raw materials is to comply with the US Forced Labor Prevention Act, ultimately paving the way for its listing.

In addition to gradually "drawing a line" with China in terms of the supply chain, SHEIN has been distancing itself from China in various ways and intensifying its "de-sinicization" efforts.

For example, through a complex shareholding structure design in its early years, SHEIN transformed itself from a "Chinese company" to a "Singaporean company." Members of the SHEIN management team have repeatedly stated that "SHEIN is not a Chinese company, it is a Singaporean company that leverages China's supply chain."

Image source: Lianhe Zaobao

On May 8, 2024, to curry favor with the United States, at the Milken Institute Global Conference in Los Angeles, Donald Tang, SHEIN's Executive Chairman, made controversial remarks about SHEIN's identity as a "Chinese-Singaporean-American" company.

When asked about SHEIN's origin, Donald said it is both a Chinese, Singaporean, and American company. However, by first denying its "Chinese identity" and then presenting an ambiguous identity, SHEIN sparked controversy over its corporate identity, fueling doubts among Western politicians and regulatory agencies.

Over the years, SHEIN has hoped to gradually "decouple" from China in terms of the supply chain. In response, media outlets such as People's Daily Overseas Edition have commented that SHEIN's strenuous efforts to shed its "Chinese" traces and various "de-sinicization" operations are fundamentally aimed at bypassing domestic regulation and better going public in the United States as a "Singaporean company".

Image source: People's Daily Overseas Edition

Ironically, SHEIN's previous efforts to de-sinicize and curry favor with the United States have been somewhat futile.

For example, in early 2024, when SHEIN prepared to go public in the United States, Bloomberg reported that US Senators Marco Rubio and others requested the US Securities and Exchange Commission to block SHEIN's listing in the United States, stating that the company should disclose more information about its operations in China.

Afterward, the UK began gradually releasing news of supporting SHEIN's IPO in London, from the media to politicians. However, some media reports revealed that a US senator played a key role in blocking SHEIN's listing in the United States and is now fully committed to blocking its listing in London.

The politician posted a letter he sent to a UK politician in June on the US Senate webpage, stating, "Out of friendship, I now feel it is my duty to repeat these warnings and urge caution before allowing SHEIN to list in London in the UK."

Another view is that the US election results may make SHEIN's IPO extremely difficult, as the newly nominated Secretary of State candidate was a fierce critic of SHEIN. His criticism, along with that of other US politicians, prompted the company to abandon its New York listing plans and turn to London.

Image source: Screenshot of Bloomberg column article

It is evident that after the UK's support and the US's obstruction, SHEIN's listing has become entangled in the political game between the two countries. Coupled with the recent inquiry and accusations of disregarding the UK Parliament, it is predictable that even if SHEIN switches to London for listing again, it may not succeed as desired.

Regarding the much-discussed supply chain issue, SHEIN has been accused of adjusting its supply chain to reduce dependence on Chinese raw materials. Some media even reported that SHEIN privately assured US policymakers that it has strict systems to prevent suppliers from using Chinese cotton, but in reality, it still relies heavily on China.

Although SHEIN is accelerating its global supply chain layout and cooperating with factories in Brazil and Turkey to produce products closer to American and European shoppers, and is "de-sinicizing" in various ways, most of its products are still produced in China, which remains its main production base.

According to available data, in September 2024, SHEIN's job postings showed that it had 2,054 job openings globally, of which 92% were in China and only 0.5% were in Singapore.

Simultaneously, SHEIN's proud supply chain is deeply rooted in China, with Guangzhou Panyu as its supply chain base. Although the company has built some factories overseas, their production capacity is still negligible compared to that in China.

Even with a factory in Istanbul, Turkey, it can only supply 20% of goods to the EU region. This means that its supply chain's dependence on China will continue for a long time.

Therefore, SHEIN executives' claims that they are not a Chinese company are difficult to substantiate. This also means that no matter how SHEIN distances itself from "China," it cannot deny its Chinese roots, and the risks it faces during globalization will not change because SHEIN denies its "Chinese genes".

So, what will be the fate of SHEIN's London listing attempt next? Let's wait and see.

Final Thoughts

SHEIN's exhaustive efforts to seek listing and its difficult globalization journey are common problems faced by Chinese enterprises seeking overseas development. While SHEIN can be considered a business card in the cross-border e-commerce industry and an exemplary "model project" for Chinese enterprises going global, the challenges it encounters during globalization are also issues that other enterprises need to address.

Firstly, trade tensions between nations have escalated, with tighter regulatory policies impeding market expansion, a phenomenon clearly observable. From overseas countries raising tariffs to pressuring Chinese enterprises to "decouple and disengage" in various forms, these are inevitable hurdles for companies like SHEIN pursuing global expansion. As a trailblazer in the cross-border e-commerce sector, SHEIN is not immune to the impact of these uncertainties.

Secondly, the fashion industry, particularly in regions like the European Union, is intensifying its focus on environmental sustainability. For instance, France has proposed imposing an environmental tax or substantial fines on Chinese cross-border e-commerce enterprises, including SHEIN, starting in the first half of 2024.

In mid-September 2024, the prestigious media outlet Wired published an article titled "With the Help of AI, SHEIN Has Become the Biggest Polluter in the Global Fast Fashion Industry." The subtitle revealed that SHEIN's emissions nearly doubled in 2023, positioning it as the worst offender.

Image source: ECNS

Furthermore, overseas regulatory policies concerning forced labor and employee human rights are compelling companies like SHEIN to transform their business models, production relations, and product supply chains. The ongoing challenge of adapting to local laws and achieving compliant development persists.

Image source: Bloomberg official website

Thus, SHEIN's global strategy and its struggles to list overseas serve as both a vivid depiction and a mirror of Chinese enterprises venturing abroad. It underscores both the immense potential of overseas markets and the difficulties and challenges inherent in this path.

In this context, some industry experts believe that SHEIN's attempt to "de-China" might not be a prudent move. Besides listing in European and American markets, there are alternative capital markets like Hong Kong that can accommodate these enterprises. Therefore, whether SHEIN's tumultuous journey to the capital market will yield blessings or setbacks remains to be seen.

Regardless of whether SHEIN acknowledges its Chinese roots, we hope it can successfully navigate the overseas capital markets, becoming a genuine benchmark for China's cross-border e-commerce enterprises and a proud representation of Chinese businesses going global.

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