Shein’s IPO Under Scrutiny Amid US Labor Concerns and China’s New Listing Rules


  • Shein, a major Chinese online fashion retailer, may encounter potential challenges in their plan to list publicly due to political pushback in the U.S over suspicion of forced labor in the supply chain.
  • The company, which shifted its headquarters from Nanjing to Singapore, was valued at $66 billion in their May 2021 fundraising round and intended to go public in the U.S.
  • However, the recent changes of Beijing’s rules and previous precedents involving Didi Global may complicate Shein’s IPO plans.
  • Authorities in China may interfere due to various concerns regarding the company’s offshore location, even though Shein doesn’t own or operate any production facilities.
  • A 2022 Bloomberg examination found connections between Shein’s clothing materials and China’s Xinjiang region, where forced labor has been alleged.
  • Shein claimed a “zero tolerance” approach towards forced labor. However, U.S policymakers insist on the SEC to ensure that Shein is not exploiting Uyghur forced labor before launching on the U.S. market.

Impact on Shein’s IPO

Rumors about Shein’s involvement in forced labor might challenge their U.S. IPO, states a report. The bipartisan lawmakers seek assurances from the Securities and Exchange Commission (SEC) that the Chinese retailer isn’t linked to forced labor in advance of its anticipated official listing.

Shein’s Business Operations and Relocation

In May, Shein, which has since moved its main office from Nanjing to Singapore, garnered a valuation of $66 billion in a fundraising campaign. Nonetheless, it still followed through with its plans for a U.S. IPO, filed with the Chinese authority in November, according to sources.

Responses from Related Parties

As of Friday, neither the China Securities Regulatory Commission (CSRC) and the SEC nor Shein itself gave any response to inquiries for comments. These sources requested anonymity due to the fact they are not authorized to talk with the press.

Impact of Chinese Regulations

Opening on U.S. markets would mean Shein is subject to Beijing’s updated rules for offshore IPOs of Chinese companies. This might prompt various authorities to scrutinize IPO applications, leading to a more unpredictable situation due to varying objectives among these organizations, such as data protection or national security.

The Influence of CSRC Listing Rules

Shein mainly relies on around 5,400 third-party contract manufacturers, primarily based in China, for its supply chain. Therefore, the Chinese company falls under the purview of the CSRC listing rules, which consider more than just the form but also the substance of a company’s operations, says one source. The rules grant the CSRC leeway on their enforcement.

Allegations against Shein

According to Bloomberg, Shein’s products might be linked to the contentious Xinjiang area in China, where there have been allegations of forced labor and internment targeting the Uyghur minority. Despite these allegations, Shein has stated it has “zero tolerance” for forced labor and maintains a code of conduct in line with the International Labour Organization’s standards.

The Role of SEC

Though the SEC doesn’t have authority to prevent IPOs over claims of human rights abuses, it can compel companies to disclose facts about their supply chains. Lawmakers in the U.S. demand that the SEC oblige Shein to verify independently that it has not engaged in Uyghur forced labor to get listed in the U.S.

Importance of the De Minimis Rule

Analysts believe that the de minimis rule, which allows Chinese online stores selling affordable goods to bypass certain taxes and regulations, plays a key role in Shein’s commercial success in the U.S. The rule also protects the company from prohibitions designed to prevent forced labor in consumer goods supply chains.

Given the ongoing concerns and regulatory changes, the potential IPO of Shein could significantly impact traders and investors who are interested in the consumer goods market and Chinese companies.

PIP Penguin