[Business & Issues] Rejected in New York, Snubbed in London... "Chinese Uniqlo" Shein's Humiliating Turn to Hong Kong

After Planning Listings in New York and London, Shein Abruptly Shifts to Hong Kong
Concerns Over Performance Due to U.S.-China Tariff War
"Rising Prices Could Turn Into an Opportunity"

AFP Yonhap News

China's largest fast fashion company, Shein, has abruptly shifted its IPO plans from New York and London to Hong Kong. Shein had initially pursued a listing on the New York Stock Exchange in 2023, but after being rejected by U.S. authorities, the company turned to the London Stock Exchange last year. Recently, as UK authorities have also appeared to delay approval, Shein has ultimately decided to head to Hong Kong. Experts believe that while Shein may face performance setbacks in the short term due to the tariff war initiated by the Donald Trump administration, the ongoing trend of rising prices and the growing preference for low-cost brands could actually work in Shein's favor over the medium to long term, given its price competitiveness.

Shein Pursues Hong Kong IPO After London Listing Hits Roadblock

Exterior view of the Hong Kong Stock Exchange (HKEX). Photo by Reuters

Shein reportedly submitted a draft prospectus to the Hong Kong Stock Exchange (HKEX) at the end of last month and requested listing approval from the China Securities Regulatory Commission (CSRC). According to Chinese-language media outlet China Times, which cited sources familiar with the matter, "This Hong Kong listing appears to be aimed at putting pressure on UK regulators." The report added, "Shein has not completely abandoned its plans to list in London. If the UK Financial Conduct Authority (FCA) is willing to expedite Shein's listing through regulatory easing, it is highly likely that Shein would prioritize a London listing over Hong Kong."

Since May of last year, Shein had been preparing for a London Stock Exchange listing, but progress stalled as FCA approval was delayed. Shein's IPO efforts began in earnest in 2023, when it was preparing for a New York listing. In May of that year, Shein was valued at $66 billion by investment institutions and applied to list on the New York Stock Exchange, but the plan was scrapped after the U.S. government refused to approve it. The company then shifted its focus to the London Stock Exchange and proceeded with the necessary steps.

Strong Revenue Growth...But U.S.-China Tensions and Human Rights Controversy Intensify

Shein is the world's largest fast fashion brand and online retailer, with sales nearly quadrupling over the past five years. According to China Merchants Securities, Shein's revenue grew from $10 billion in 2020 to $38 billion last year?a 3.8-fold increase. The company exports low-cost apparel to more than 200 countries worldwide and has been dubbed the "Chinese Uniqlo."

However, the prolonged U.S.-China trade dispute has made the IPO process difficult. Since Shein applied to list on the New York Stock Exchange in 2023, the U.S. government and Congress have pressured the company to address allegations of forced labor involving cotton from China's Xinjiang Uyghur region, as well as concerns about ties to the Chinese government. Under the Uyghur Forced Labor Prevention Act (UFLPA), enacted in 2021, the U.S. government prohibits the import of apparel made with cotton from the Xinjiang Uyghur region.

The delay in UK listing approval is reportedly due to similar reasons as the U.S. rejection. In January, the UK Parliament's Business and Trade Committee held a hearing regarding Shein's London listing and pressed the company to clarify its stance on the use of Xinjiang cotton. However, Shein responded that it could not confirm whether Chinese cotton was used, fueling further controversy.

Bloomberg News reported, "Even though Shein is a mega-IPO candidate valued at 50 billion pounds, it will be difficult for the company to list on the London Stock Exchange, as the Labour Party led by Prime Minister Keir Starmer has made strengthening labor protections a core election pledge."

Inflation Is Key..."Price Competitiveness Remains Strong"

AFP Yonhap News

The tariff war initiated by the Trump administration is a short-term negative factor for Shein's performance.

Since April, the U.S. government has abolished the De Minimis exemption, which previously allowed duty-free imports of Chinese goods valued under $800. Subsequently, tariffs on Chinese imports were raised to as high as 145%, before being reduced to 30% following a mutual tariff agreement in May. Shein, which had expanded its exports of low-cost products to the U.S. market thanks to the De Minimis exemption, has been hit hard. According to global app analytics firm Sensor Tower, Shein's monthly active users (MAU) in the U.S. from early March to the end of June fell by about 12% over three months, to 41.4 million.

However, in the medium to long term, some analysts suggest that the tariff war could drive up overall apparel prices, ultimately benefiting Shein due to its price competitiveness. Susannah Streeter, Head of Markets at UK financial firm Hargreaves Lansdown, told CNBC, "Low-cost brands like Shein and Temu do not need to operate offline stores and have low production costs. Despite Western criticism over labor rights violations, as overall apparel prices rise, consumers are likely to be drawn to lower prices and may be more inclined to choose these brands."