Shein pledges China supply chain upgrade in bid to woo Beijing

[BEIJING] Shein plans to invest over 10 billion yuan (S$1.8 billion) to strengthen its supply chain in Southern China, as the fast-fashion online retailer seeks to reinforce ties with Beijing amid a stalled Hong Kong initial public offering and mounting external pressures.Shein will channel the investment into intelligent supply chain systems in Guangdong Province, home to its vast manufacturing networks, the company’s founder and chairman Xu Yangtian said in a rare public speech at a conference in the city of Guangzhou on Tuesday (Feb 24).Shein will “remain firmly rooted in Guangdong and build a world-class fashion industry cluster,” Xu said. “We will be heavily involved in Guangdong Province’s cross-border e-commerce pilot in the next three years so that more small and medium factories can reap the benefits.”Xu’s unusual public appearance and pledge to pour more resources into the southern Chinese trade hub underscore Shein’s effort to cultivate goodwill with Beijing. This marks a tactical shift from its previous strategy of distancing itself from its Chinese roots, having relocated its headquarters to Singapore several years ago and initially planning to seek a New York listing.As recent as early last year, the company has asked some of its manufacturers to move productions to Vietnam to dodge US President Donald Trump’s threat to remove the so-called “de-minimis” tax exemptions for small parcels, Bloomberg reported.But as mounting geopolitical tensions between China and the US led to increased western scrutiny of Shein, the company moved its IPO from New York to London, and then to Hong Kong. To receive Beijing’s blessing for the Hong Kong listing, the company was said to consider moving its base back to China, Bloomberg reported in August. Originally founded in eastern Chinese city of Nanjing, Shein has relied on a sprawling network of manufacturers in Guangdong to churn out ultra-low-cost clothing sold to western consumers. The retailer now works with nearly 10,000 suppliers in Guangzhou, supporting more than 600,000 jobs across the province, according to Xu.Meanwhile Shein faces growing headwinds in the western markets as tariff-induced price hikes dented consumer demand and regulators scrutinized its operations. Its US sales growth has lost momentum since August, posting double-digit year-on-year declines in recent months, according to data from Bloomberg Second Measure, which tracks the transactions of an anonymous set of US shoppers. PDD Holdings-owned Temu, another budget online retailer also heavily reliant on China’s supply chain, has seen a similar trend in US sales.The company’s legal troubles are also mounting. Last week, a Texas attorney sued Shein over allegations that it unlawfully sold toxic products and exposed sensitive personal data to China. Earlier this month, the European Union opened a full-scale probe into its sales of child-like sex dolls. BLOOMBERG