Shein’s London IPO Overshadowed by Transatlantic Geopolitics

Turns out Washington and Westminster can both be royal pains.

This week, a UK Labour Party official told the Financial Times he’d like to see legislation modeled on the US’ Uyghur Forced Labor Prevention Act, which heavily impacts imports of Chinese textiles — i.e., a potential problem for Shein, which uses majority China-based manufacturers for its clothing. This comes one week after the Biden administration announced it’s planning to close a tax loophole that has been of enormous benefit to Shein’s business model.

London Calling

Shein and its rival fast-fashion e-commerce parvenu Temu have become subjects of intensifying US scrutiny over the past year or so. They are both China-founded, although Shein is now headquartered in Singapore, and both have followed a business model of shipping extremely cheap items to international consumers, partly by using a tax loophole called de minimis that exempts directly-shipped packages under $800 in value from import tax. The Biden administration said last week that over the last 10 years, the number of packages flowing into the US under de minimis has gone up from 140 million per year to 1 billion.

Shein was clearly sensing shifting winds in the US as it switched its IPO plans from New York to London, but now a one-two from both US and UK officials could rain on that parade: 

• Shein’s decision to list in London brought the UK’s financial regulator under elevated scrutiny, and now a Labour politician who’s head of a parliamentary business committee said he wants to see legislation for combatting forced labor in Chinese supply chains.
• Shein has historically been accused of benefiting from forced labor, especially from the suppressed Uyghur population. In a statement to the FT, Shein said it has a “zero-tolerance policy” for forced labor, though its 2023 sustainability report published last month did find two cases of child labor in its supply chain.

The Clock is Ticking: In other geopolitical football news, TikTok’s court battle against its US ban from President Biden started yesterday, and is due to run for a long time. If only the prosecution could break their arguments down into neat, bite-sized videos.