China’s Fast Fashion Apps Become New Geopolitical Battleground

Washington isn’t just dressing down Chinese tech giants.

Online fast-fashion darlings are facing the same geopolitical headwinds buffeting the likes of TikTok and Huawei. Shein, the company that bulldozed a path to Western consumers for fellow China-based fast-fashion apps, took a valuation haircut of around $34 billion on Wednesday.

Fashion Is Danger

The fast fashion colossus, which rode to international success during the pandemic with its easy-to-use platform and startlingly cheap clothes, was valued at $100 billion last year. That’s down to $66 billion on the back of a fresh $2 billion fundraising injection, despite raking in $23 billion in revenue last year, according to The Wall Street Journal. Fellow China e-retailer Pinduoduo followed in Shein’s wake by launching Temu, the international version of its app, in September 2022. Both Shein and PDD Holdings, Pinduoduo and Temu’s parent company, have moved their main offices out of China in a bid to cement their international brand identities.

But Pinduoduo suffered a big setback when Google banned its Chinese app from the Play Store in March after it found versions of the app that contained malware. Given the US has a history of raising national concerns around Chinese-owned apps even when there’s no clear evidence of dodgy code, this sparked a backlash in Washington:

• In an April report, the US government accused both Temu and Shein of posing “data risks,” as well as citing concerns around forced labor in their supply chains, which Temu and Shein both refute.
• A cybersecurity analyst told CNBC that Temu is less intrusive than its Chinese sister app in what data it requests from users’ phones.

Getting caught in the geopolitical cross-fire is of course just one pressure point. Shein’s valuation trim comes during a general slump in tech stocks, and fast fashion overall is falling ever more out of vogue both with sustainability-minded younglings and, potentially, investors.

ASOS S.O.S.: British fast-fashion e-retailer ASOS announced last week that its losses had widened in the last six months to £272 million. The Financial Times responded to the news with an opinion column that likened digital fast-fashion retailers to the clothes they sell: “fun, flimsy and ephemeral.” Does that remind anyone else of a TikTok video?