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Shein’s China Cybersecurity Review: Prep for US IPO Underway

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Chinese fast fashion retailer Shein is facing a cybersecurity review in China as it seeks approval for its IPO in the US. The Cyberspace Administration of China (CAC) is examining how Shein handles and shares data on its partners, suppliers, and staff in China. The review could complicate Shein’s listing plans, which have already faced opposition in the US. A bipartisan group of US lawmakers has called on the Securities and Exchange Commission (SEC) to block Shein’s IPO until it verifies it does not use forced labor. Additionally, Shein must also receive approval from the China Securities Regulatory Commission (CSRC) to proceed with its IPO.

China-based fast fashion retailer Shein is undergoing a cybersecurity review in China as it seeks approval for its initial public offering (IPO) in the US. The Cyberspace Administration of China (CAC) is investigating how Shein handles and shares data on its partners, suppliers, and staff within China. The review comes amid China’s efforts to tighten control over data flows and eliminate national security risks. The CAC wants to determine whether Shein can protect sensitive data from being leaked overseas.

Shein, which was valued at more than $60 billion last year, filed to go public in the US in November 2023. However, its listing plans have faced political opposition in the US. A bipartisan group of US lawmakers has called on the Securities and Exchange Commission (SEC) to block Shein’s IPO until it can verify that the company does not use forced labor. Shein has denied using forced labor or contractors in China’s Xinjiang region. The company has yet to receive approval from the SEC for its listing.

The cybersecurity review in China adds another complication to Shein’s listing plans. Even if it receives approval from the SEC, Shein will still need permission from the China Securities Regulatory Commission (CSRC) to proceed with its IPO. The CSRC has recently implemented new listing rules for Chinese firms going public offshore. These rules involve various Chinese authorities, such as the National Development and Reform Commission and the CAC, in the approval process.

The new listing rules increase uncertainty for Shein, as different agencies may have different priorities, such as national security or data protection. To be subject to the Chinese listing rules, a company must generate 50% or more of its revenue, profit, total assets, or net assets in mainland China. The rules also apply if a company’s main business activities are conducted in China or if the majority of its senior managers are Chinese citizens or domiciled in mainland China.

In addition to the cybersecurity review and potential opposition in the US, Shein also faces challenges related to presenting itself as a global rather than a Chinese brand. The company’s reliance on third-party contract manufacturers in China subjects it to the CSRC listing rules. Shein does not own or operate any manufacturing facilities of its own.

Overall, the cybersecurity review in China further complicates Shein’s listing plans, which have already faced opposition in the US. It remains to be seen whether the company will receive approval from both the SEC and the CSRC to proceed with its IPO.

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