As it spread internationally, Shein, a fast-growing fast fashion app, has gradually cut ties with its home country, China. It moved its headquarters to Singapore and deregistered its original company in Nanjing. It has set up operations in Ireland and Indiana and hired Washington lobbyists to highlight its US expansion plans as it prepares for a potential initial public offering this year.
Still, the apparel retailer can’t shake off the focus on its ties to China. Along with other brands such as viral social app TikTok and shopping app Temu, Shein has been targeted by US lawmakers on both sides of the aisle. Politicians accuse the company of making its clothes with cloth made by forced labor and calling it a tool of the Chinese Communist Party — claims Shein denies.
“No one should be fooled by Shein’s efforts to cover his tracks,” wrote Sen. Marco Rubio, R-Florida. letter other lawmakers this month.
As relations between the United States and China continue to sour, some of China’s most entrepreneurial brands have taken steps to distance themselves from their home country. They set up new factories and headquarters outside China to serve the United States and other foreign markets, emphasized their foreign ties, and deleted any mention of “China” from their corporate websites.
TikTok has set up headquarters in Los Angeles and Singapore and invested in new US operations that it says will take its US user data away from parent company ByteDance. Temu was headquartered in Boston and was founded by its parent company PDD Holdings moved its headquarters from China to Ireland.
Chinese solar companies have set up factories outside of China avoid US tariffs on solar panels from China and limit their exposure to Xinjiang, a region that is in the United States now bans imports from due to his use of forced labor.
JinkoSolar, the monster he makes one in 10 solar modules installed worldwideestablished a supply chain entirely outside of China to manufacture goods for the United States.
Other companies, including foreign-owned ones, are building walls between their Chinese operations and their global businesses, judging it to be the best way to avoid new restrictions or reputational risks.
Sequoia Capital, a venture capital firm, he said last week that it will split its global business into three independent partnerships and spin off unique entities for China and India.
Shein said in a statement that it is “a multinational company with diversified operations around the world and customers in 150 markets, and we make all business decisions with that in mind.” The company said it has zero tolerance for forced labor, does not source cotton from Xinjiang, and fully complies with all US tax and trade laws.
A TikTok spokesperson said the Chinese Communist Party has no direct or indirect control over ByteDance or TikTok, and that ByteDance is a private, global company with offices around the world.
“Roughly 60 percent of ByteDance is owned by global institutional investors such as BlackRock and General Atlantic, and its CEO is based in Singapore,” said Brooke Oberwetter, a spokeswoman.
Temu did not respond to requests for comment.
Analysts said the companies were driven out of China by various motivations, including better access to foreign customers and escaping the risk of a crackdown by Chinese authorities.
Some companies have more practical concerns, such as cutting labor and shipping costs, reducing tax bills or shedding the bad reputation that American buyers still associate with goods made in China, said Shay Luo, director of supply chain consulting at Kearney.
But a wave of tougher restrictions in the United States on trade with China also appears to be having an effect.
Research by Altana, a supply chain technology company, shows that since 2016, new regulations, customs enforcement measures and trade policies that hurt Chinese exports to the United States have been followed by “adaptive behaviors” such as setting up new branches outside of China, Evan said. Smith, the company’s CEO.
Going global is not a new phenomenon for Chinese companies. The Chinese government launched a “go out” policy. at the turn of the century to encourage state-owned enterprises to invest abroad to acquire overseas markets, natural resources and technology.
Private companies such as electronics firm Lenovo, appliance maker Haier and e-commerce giant Alibaba soon followed, looking for investment targets and new customers.
As tensions between the United States and China have risen in recent years, investment flows between the countries have slowed. US tariffs on Chinese goods imposed by President Donald J. Trump and maintained by President Biden have encouraged companies to shift production from China to countries such as Vietnam, Cambodia and Mexico. The pandemic, which shut down factories in China and raised the cost of moving goods across the ocean, has accelerated this trend.
International companies are now increasingly adopting the “China plus one” model of securing an additional source of goods in another country in the event of a supply disruption in China. Chinese companies also follow this practice, Ms. Luo said.
For the 12 months ending in April, the share of imports into the United States from China hit its lowest level since 2006.
“It’s definitely a rational strategy for these companies to move abroad, move production or their headquarters to a third country,” said Roselyn Hsueh, an associate professor of political science at Temple University.
In addition to tariffs and the ban on products from Xinjiang regionThe United States imposed new restrictions on technology trade and tighter security controls on Chinese investment.
The Chinese government is also stopping the transfer of data and currency outside the country and that pressed efforts by some Chinese companies to list their shares on US exchanges because of these concerns.
Beijing detains and harasses top technology executives and foreign consulting firms. And its draconian lockdowns during the pandemic have made it clear to businesses that they operate in China at the mercy of the government.
“Companies like Shein and TikTok are moving overseas to reduce their regulatory and reputational risk in the US, but also to reduce the likelihood that their founders and employees will be intimidated or arrested by Chinese officials,” said Isaac Stone Fish, CEO of Strategy Risks. consultant for corporate exposure in China.
But companies like Shein and Temu still source almost all of their products from China, and it’s not clear that the changes Chinese companies are making to their businesses have done much to reduce the heat.
Opposition to these companies in Washington is fueled by an outrageous combination of legitimate concerns about national security and forced labor and political appeals to China. It also appears to be due to backlash from some competitors to these services, which are now some of the most downloaded apps in the United States.
In March, a group called Shut Down Shein emerged to push Congress to take action against the retailer. The group that hired five lobbyists with Actumdeclined to say who is funding her campaign.
In a five-hour hearing in March, lawmakers grilled the CEO of TikTok over whether to release US user data to the Chinese government or censor information broadcast to young Americans. Legislation that could ban the app permanently is being considered.
Some lawmakers argue that JinkoSolar’s panels are made in the US should not be eligible for government tax breaks and for reasons that have not yet been disclosed, the company’s Florida factory was raided by customs officials last month.
Governments of countries that have often been more welcoming to Chinese investment are also increasingly hostile. In January, Glenn Youngkin, the Republican governor of Virginia, blocked a deal for Ford Motor to set up a factory using technology from a Chinese battery maker, Contemporary Amperex Technology, calling it a “Trojan horse relationship.”
A House committee set up to investigate economic and security competition with China is investigating Temu and Shein’s ties to forced labor in China, and lawmakers are demanding Shein will be audited before its IPO
“The message from our investigation into Shein, Temu, Adidas and Nike is clear: either get your supply chains clean – no matter how difficult – or get out of countries like China involved in forced labour,” the representative said Mike Gallagher, the committee’s Republican chairman, said in a statement.
An a Bloomberg investigation in November, they discovered that some of Shein’s clothes were made from cotton grown in Xinjiang. In a statement, Shein said it has “created a four-pronged approach to ensure compliance” with the law, including “a code of conduct, independent audits, robust tracking technology and third-party testing.
Jordyn Holman contributed reports from New York.