The Shein logo can be seen on a smartphone, while the Chinese online retailer's website is open on a laptop.

Monika Skolimowska | Photo Alliance | Getty Images

Chinese-founded e-commerce company Shein's hopes of going public in the United States are dwindling by the day, experts say, as rising tensions between Beijing and the US undermine business and trade.

The company, last valued at $66 billion, confidentially filed to go public in the US in November. Since then, the company has faced resistance in its efforts to join the U.S. retail industry, including numerous rejected attempts to join the National Retail Federation, the industry's largest trade association, CNBC previously reported.

The e-commerce startup wanted to go public and became a household name in the US by offering low prices and the ability to quickly offer new styles. The company is about to conquer a large market share, mainly from American retailers Hole, TJX Companies And Macy'saccording to UBS data from last year, and remains a challenge Goal, Walmart And Amazon.

But as political opposition to the US IPO grows, Shein appears to be moving up a gear, with the company reportedly preparing to confidentially apply for a £50 billion bid in London in the coming weeks. The company would likely have preferred to list in the U.S. because the offering could command a higher valuation than in Britain, said Angelo Bochanis, an IPO analyst at Renaissance Capital, which provides pre-IPO research and IPO-focused ETFs.

But the path hasn't been easy, as federal and state officials call on the Securities and Exchange Commission to closely investigate or even block the U.S. IPO.

“Scrutinizing companies with high profiles and roots in China is currently very much in political vogue in the United States,” Bochanis said.

According to Bochanis, an IPO in London could in theory be simpler than an American IPO. With the British Parliament dissolved and the London Stock Exchange 'desperate for big wins' as it faces an IPO drought, Shein is said to be taking some of the obstacles that it could have happened differently, he said.

If Shein's London IPO succeeds, the company is unlikely to continue pursuing a U.S. offering, said University of Florida finance professor Jay Ritter, who studies IPOs.

Not all companies linked to China are caught in the web of rising political tensions. Chinese electric vehicle company Zeekr went public in the US last month. It became one of the first prominent Chinese companies to do so in the US, even as the Biden administration has increasingly cracked down on Chinese-made electric vehicles.

Chinese ties and data privacy

Shein is “one of the few” China-linked companies that has achieved strong brand recognition among U.S. consumers, Bochanis said.

The size of the potential offer and the long, high-profile process involved have helped make Shein an attractive target for politicians from both parties looking to crack down on Beijing-linked companies.

Shein was founded in China and has since moved its headquarters to Singapore. But much of the company's supply chain is still in the country.

In December, the House Committee on Energy and Commerce sent a letter to Shein requesting information about the company's collection of user data and its relationship with the Chinese government, calling a possible link with Beijing a “serious risk to e-commerce, consumer safety, and the privacy and security of people's data”.

The panel sent a similar letter to TikTok, the popular social media platform of Chinese parent company ByteDance.

According to Susan Ariel Aaronson, a professor at George Washington University, the Chinese Communist Party can legally request any Chinese-owned company to share information about its customers. Although Shein is headquartered offshore, its ties to manufacturing in China and reports that it had sought Beijing's permission to go public in the U.S. raised concerns among U.S. officials about the data it shares with the Chinese government could share.

That relationship contributed to a proposed U.S. ban on TikTok. The legislation passed by Congress last month aims to force the platform to sell its US assets by January 19 or cease all operations in the country.

ByteDance and several creators on the platform have filed lawsuits to block the account.

While Shein doesn't have access to the amount of data available to a social media giant like TikTok, the proposed ban has cast more doubt on a U.S. IPO for the company.

“[Congress] just showed us that if a certain Chinese company is perceived as a threat, they can unite and pass a law, and that is much stronger than an executive order or a presidential order,” said Antonia Tzinova, national security attorney at Holland . & Knight.

Shein shipping issues

The political scrutiny beyond data privacy may prove harder for Shein to overcome.

The retailer has long been criticized for its alleged use forced labor in the supply chain and poor working conditions for its employees.

In 2021, the United States passed the Uyghur Forced Labor Prevention Act, which bans companies that produce goods in China's Xinjiang region, infamous for its Uyghur detention camps, from selling in the US. Although U.S. government agencies claim that Shein's supply chain has ties to the Xinjiang region, the company does not produce its own goods, instead using China-based micro-manufacturers that make it more difficult to trace materials.

Shein has repeatedly denied the allegations of forced labor and says it implements a system to support compliance with U.S. law within the company.

The company has also come under fire for using loopholes in US customs law.

Because the company does not import its products in bulk to sell from a U.S. warehouse, but instead ships by order, it is exempt from some of the heaviest U.S. import taxes. Rivals have criticized this practice as giving Shein an unfair competitive advantage.