Tiktok, Shein and other companies distanced themselves from China

Tiktok, Shein and other companies distanced themselves from China

As it expanded internationally, Shein, the fast-growing fashion app, progressively severed ties to its home country, China. It moved its headquarters to Singapore and deregistered its parent company in Nanjing. It established operations in Ireland and Indiana, and hired Washington lobbyists to highlight its US expansion plans as it prepares for a possible initial public offering this year.

Yet the clothing retailer can’t shy away from its relationship with China. Shein has become a target of US lawmakers in both parties, along with other brands such as viral social app TikTok and shopping app Teemu. Politicians are accusing the company of making their clothes forced labor and calls it a tool of the Chinese Communist Party – claims Shein denies.

Republican Senator Marco Rubio of Florida said, “No one should be fooled by Sheen’s efforts to cover up his tracks.” a letter For other MPs this month.

As relations between the United States and China continue to deteriorate rapidly, some of China’s most enterprising brands have taken steps to distance themselves from their home country. They have set up new factories and headquarters outside China to serve the United States and other overseas markets, emphasizing their overseas ties and removing any mention of “China” from their corporate websites.

TikTok has set up headquarters in Los Angeles and Singapore, and invested in new US operations that it says will separate US user data from its parent company, ByteDance. TEMU has established a headquarters in Boston, and its parent company, PDD Holdings, moved its headquarters From China to Ireland.

Chinese solar companies have set up factories outside China to avoid US tariffs on solar panels from China and limit their exposure to Xinjiang, a region from which the United States now bans imports. use of forced labor,

JinkoSolar, a giant that produces One in 10 solar modules installed globallyhas set up a supply chain entirely outside China to make goods for the United States.

Other companies, including foreign-owned ones, are building walls between their Chinese operations and their global businesses, seeing this as the best way to avoid new sanctions or risks to their reputations.

Venture capital firm Sequoia Capital last week said it would split its global business into three independent partnerships, creating separate entities unique to China and India.

Sheen said in a statement that it was “a multinational company with diversified operations around the world and customers in 150 markets, and we make all business decisions with this in mind.” The company said it has zero tolerance for forced labor, does not source cotton from Xinjiang and fully complies with all US tax and trade laws.

A spokesperson for TikTok said that the Chinese Communist Party had neither direct nor indirect control over ByteDance or TikTok and that ByteDance was a private, global company with offices around the world.

“About 60 percent of ByteDance is owned by global institutional investors such as BlackRock and General Atlantic, and its CEO lives in Singapore,” said Brooke Oberwetter, a spokeswoman.

Teemu did not respond to requests for comment.

Analysts said a variety of motivations are driving companies out of China, including better access to foreign customers and avoiding the risk of crackdown by Chinese authorities.

Some companies have more practical concerns, such as reducing their costs for labor and shipping, reducing their tax bills or shedding the tardy reputation that American buyers continue to associate with goods made in China, according to consulting firm said Shai Luo, a principal at Kearny who conducts the study. supply chains.

But the wave of tougher sanctions on doing business with China in the United States is also having an effect.

Research by supply chain technology company Altana shows that since 2016, new regulations, customs enforcement actions and trade policies hurt Chinese exports to the United States, with “adaptive behavior” being followed, such as Setting up new subsidiaries outside China, said Ivan Smith, the company’s chief executive officer.

Going global for Chinese companies is not a new phenomenon. Chinese government took the initiative “Get Out” Policy Encouraging state-owned enterprises to invest overseas to gain overseas markets, natural resources and technology at the turn of the century.

Private companies such as electronics firm Lenovo, appliance maker Haier and e-commerce giant Alibaba soon found investment targets and new customers.

As tensions between the United States and China escalate in recent years, investment flows between the countries have slowed. President Donald J. US tariffs on Chinese goods imposed by Trump and made by President Biden encouraged companies to move manufacturing from China to countries such as Vietnam, Cambodia and Mexico. The pandemic, which halted factories in China and raised the cost of moving goods across oceans, has accelerated the trend.

International companies are now increasingly adopting the “China plus one” model to secure an additional source of goods in another country in case of supply disruptions in China. Ms. Luo said Chinese companies are also following the practice.

Share of imports from China to the US in the 12 months ending April reached the lowest level since 2006,

“It’s certainly a rational strategy for these companies to offshore, manufacturing, or moving their headquarters to a third country,” said Roselyn Hsueh, associate professor of political science at Temple University.

In addition to tariffs and restrictions on products from the Xinjiang region, the United States has imposed new restrictions on trade in technology and stricter security reviews for Chinese investment.

The Chinese government, too, is restricting the transfer of data and currency out of the country, and it has crushed efforts by some Chinese companies to list their shares on US exchanges because of such concerns.

Beijing has detained and harassed top tech executives and foreign consulting firms. And its draconian lockdown during the pandemic made it clear to businesses that they operate in China at the mercy of the government.

“Companies like Shein and TikTok go overseas to reduce their US regulatory and reputational risk, but also reduce the likelihood that their founders and employees will be intimidated by Chinese authorities,” said Isaac Stonefish, chief executive of Strategy Risk. Or get arrested.” A consultant on corporate risk for China.

But companies like Sheen and Teemu still source nearly all of their products from China, and it’s unclear whether the changes Chinese companies are making to their businesses have taken the heat off.

These companies’ opposition in Washington is being fueled by a provocative combination of legitimate concerns over national security and forced labor, and the political appeal of looking tough on China. It also appears to be driven by opposition from some of the competitors to these services, which are now some of the most downloaded apps in the United States.

In March, a group called Shut Down Sheen emerged to pressure Congress to take action on the retailer. group that hired Five lobbyists with firm Actumdeclined to reveal who is funding his campaign.

In a five-hour hearing in March, lawmakers questioned TikTok’s chief executive about whether it would make US user data available to the Chinese government, or censor information broadcast to young Americans. Legislation is being considered that could permanently ban the app.

Some lawmakers are arguing that GinkgoSolar’s US-made panels should not be eligible for government tax credits, and for reasons that have not yet been disclosed, the company’s Florida factory was raided by customs officials last month .

State governments, which have often been more welcoming to Chinese investment, are also becoming more hostile. In January, Virginia’s Republican governor Glenn Youngkin blocked a deal for Ford Motor to set up a factory using technology from contemporary Ampirex Technology, a Chinese battery maker, calling it a “Trojan-horse relationship.”

A House committee set up to investigate economic and security competition with China is probing the ties Teemu and Sheen have with forced labor in China, and lawmakers are demanding sheen to be audited before its IPO

“The message from our investigations of Sheen, Teemu, adidas and Nike is clear: either make sure your supply chain is clean – no matter how difficult it is – or get out of countries like China trapped in forced labor,” the representative said. Mike Gallagher, the Republican chairman of the House of Representatives committee, said in a statement.

One investigation by bloomberg found in November that some of Sheen’s clothing was made from cotton grown in Xinjiang. In a statement, Sheen said it had created “a four-step approach to ensuring compliance” with the law, including “a code of conduct, independent audits, robust tracing technology and third-party testing”.

Jordan Holman Contributed reporting from New York.

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