Shein plans to launch and will offer its services to U.S. customers in November, but the Cyberspace Administration of China will conduct a security review of Shein.
Cyberspace Administration of China Will conduct a Security Review of Shein
Shein, a fashion giant, plans to have an initial launch in the United States in November to offer services and its products to Americans. However, the Cyberspace of China will conduct a security review of Shein's supply chain presence before it will be allowed to transact business in the U.S.
Additionally, the security review will also focus on how Shein will handle the confidential and personal information of its employees, partners, and manufacturers. Most of the manufacturers and suppliers of Shein are coming from China. The CAC will also review if Shein can handle its security and that the data will not leak overseas.
U.S. Regulators Raise Concern
Drew Bernstein, the co-chairman of Marcum Asia and an expert in U.S. and Asian capital markets, said that Shein would not need the permission of Beijing if it was not listed as a Chinese company. Shein is working so hard to present itself in the global market.
Meanwhile, U.S. regulators and lawmakers are raising concerns not only for Shein but for other Chinese companies doing business in the country. They want to ensure that these Chinese companies will not end up giving sensitive and confidential information about American customers to the Chinese government.
Beijing Launched a Similar Review in 2021
Beijing conducted the same security review of ride-hailing giant Didi Global just days after it went public on the New York Stock Exchange. It was found that Didi Global raised some $4.4 billion but the company was delisted within a year and shareholder's value was wiped out.
After the downfall of Didi Global, China now needs to approve any companies that seek an overseas IPO and will conduct a security review to ensure their security level. If it is found that the company cannot protect sensitive and confidential information or if it does not sit well with the Chinese regulators, then the deal will not be approved.
Shein's Position is Not The Same With Didi Global
Shein's position is not the same as Didi Global. Shein sought the approval of the Chinese regulators before it started trading in the U.S., while Didi Global started trading before asking the approval. Bernstein said that the action of Shein will help boost the confidence of investors.
Furthermore, Bernstein also added that Shein moved its headquarters to Singapore and does not sell its products in China. He said, "By having zero exposure to Chinese consumers, they're not likely to be viewed as a security-sensitive company. I think that [Shein] anticipated this and is well prepared."
A news outlet tried to reach the Cyberspace Administration of China and Shein about the latest updates on the security review. However, none of them released any statements. This is very crucial for the Chinese regulators and Shein amidst the economic tension between China and Beijing.
