January 2024 ought to be a high point for Shein. Preparing to launch its U.S. Initial Public Offering (IPO), the company has achieved everything that Chinese firms were supposedly unable to do — outcompete Western rivals on their own doorstep in a creative industry with an innovative, trend-anticipating business model.
Mixing fast fashion prices with a lavish range, whose constant new additions slot effortlessly into content-hungry social media feeds, it has succeeded in becoming the clothing equivalent of a McDonald’s drive-in and an up-and-coming gourmet restaurant, both at the same time. Valued at $66 billion in 2023, it has grown from just $1.3 billion in six years. Even more riches could await with its new stock market launch.
That is, if it launches at all. Due to the proposed IPO, Shein’s operations have come under greater attention, and nobody seems to like what they see: not the designers who allege that their uncompensated work appears on its website; not the environmentalists who warn of the social and ecological fallout in developing countries from an empire of throwaway clothing; not the factory suppliers whose margins have been cut to the bone; not Washington; and perhaps not even Beijing.
First up, the Chinese government has stepped up screening of motherland companies that float on the U.S. stock exchange, and Shein is no exception. Such gaze has already flatlined IPOs for the likes of DiDi and ByteDance, and regulators are honing in on data security as a precondition for Shein to open itself up to overseas stock traders. This will mean keeping all of its information under the Chinese Communist Party’s watchful eye, a prospect unlikely to enthrall lawmakers and customers in America, where 40% of shoppers bought it or Temu’s items last year.
The headlines resulting from China’s scan of Shein will be making its seldom-seen founder, Xu Yangtian (許仰天), squirm, too. They emphasize the company’s ties to the country, which it has been working hard to obscure by both headquartering in Singapore and diversifying its supply chain to Brazil, Turkey and beyond. Investors are reminded of the heavy-handed authoritarianism that could shrink their financial outlay in an instant, while fashion fans are bluntly retold where their purchases come from. Yes, they like cheap prices for attractive clothes. No, they do not like “made in China” written on the label.
And this is not a matter of simple racism. The Chinese Communist Party’s use of economic arm-twisting to quash freedom of expression and support for human rights both within and beyond its borders has not gone unnoticed. Neither have the allegations that Shein clothes carry the invisible stains of forced labor.
To these suspicions, Shein is extremely vulnerable and finds itself fidgeting under the scrutiny of Washington’s House Select Committee on the Chinese Communist Party, which is deepening an examination into where the materials for the firm’s apparel originate. A campaign named Shut Down Shein is also drumming up public support to block its IPO.
While the company vehemently denies any suggestion that its products emerge from a coerced workforce, an isotope analysis of its garments by Bloomberg and a specialist German laboratory named Agroisolab revealed in 2022 that some of its cotton sources to the Xinjiang Uyghur Autonomous Region (XUAR), the location where crimes against humanity are suspected or concluded by Amnesty International, Human Rights Watch and the Office of the United Nations High Commissioner for Human Rights.
U.S. law requires imports from XUAR to demonstrate that they have not been forcibly made, and pressure is growing for it to be applied more comprehensively, which has cast the spotlight on another uncomfortable aspect of the Shein success story. One of the ways it keeps prices so low is by bringing goods to America in a flotilla of packages valued at less than $800. These are not subject to tariffs, depriving Washington of revenue, and they do not attract the same level of attention from customs officials.
While the hands-off policy has been defended on the grounds that it helps small businesses, Shein does not fit into that category. Moreover, the argument that forced labor should be somehow tolerated if it keeps costs down cannot sit well with a society that is grappling to turn the page on its history of slavery and deal with the brutal legacy that has unleashed.
Naturally, China’s textile industry will react by obscuring fabric origins and producing flawed audits of factory conditions, and Shein will attempt to hide any forced labor shame within the complexity of its supply chain, while lobbying U.S. policymakers to turn a deaf ear to human rights campaigners. It will simultaneously placate Beijing by acquiescing to its data demands and whatever else the Chinese Communist Party desires. It will hope that this is enough to secure it lucrative returns when (or if) its stock is offered to the American public.
Nonetheless, with headwinds no matter which way it turns, its $10 party frocks may soon find that they have no celebration to attend.
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