China's internet regulator is conducting a security review of Shein as the fast-fashion giant prepares for its initial public offering in the United States.
A person familiar with the matter told CNBC that the Cyberspace Administration of China (CAC) is reviewing Shein's supply chain in the country, where most of its manufacturers and suppliers are located.
The assessment focuses on how Shein manages information about its employees and partners to make sure that data would not leak overseas, according to The Wall Street Journal.
The regulatory review poses some issues for Shein, which worked hard to present itself as a global as US lawmakers have expressed concerns about its ties to the region. The Chinese company confidentially filed to go public in the US last November amid strained US-China relations.
Does Shein Need China's IPO Approval?
Drew Bernstein, the co-chairman of Marcum Asia and an expert in US and Asian capital markets, said Shein might not need China's IPO approval if it is not considered a Chinese company.
US regulators are concerned about Chinese companies doing business in the US. They want to make sure that sensitive data on American customers would not end up in the hands of the Chinese government. China also has the same concerns.
Shein reportedly seeks China's approval to go public in the US. Bernstein also told CNBC that Shein had previously relocated its headquarters to Singapore.
He added that it also does not sell its products in China. These factors may alleviate concerns in Beijing about the exposure of Chinese customer data to the US.
IPO Goals of Shein
Bernstein emphasized that Shein's measures and limited connection to Chinese consumers could influence regulators' perceptions, potentially positioning the company as less sensitive to security concerns.
The ongoing security assessment marks a critical phase for Shein as it navigates the complexities of international regulations and strives to ensure a successful IPO in the US.
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