Sen. Marco Rubio has demanded that U.S. financial regulators cast a wary eye on an upcoming initial public offering by the popular online fashion retailer SHEIN, saying its information for investors may be phony because of the firm’s involvement with the Chinese Communist Party.
The Florida Republican shared those concerns in a letter last week to Securities and Exchange Commissioner Gary Gensler.
In the letter, Rubio noted SHEIN gained approval for its IPO from Chinese regulators, which “makes virtually certain that the Chinese government will censor SHEIN’s filing documents to hide pertinent information from U.S. regulators and investors about the extent and nature of its operations in the PRC, as well as the risks of doing business in the PRC.”
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Rubio urged Gensler to demand “extraordinary” disclosures from SHEIN about its relationship with the Chinese government and the CCP.
“If SHEIN is unwilling or unable to provide these disclosures, I urge you to protect U.S. investors by blocking the company’s IPO,” Rubio wrote.
The senator further argued that SHEIN’s claims to be a “global” company serve to hide its “considerable” Chinese roots and connections. Though based in Singapore, Rubio noted, the company was founded in China by a Chinese national, who is its current CEO and employs thousands of people in China. SHEIN also sources, manufactures, and ships most of its merchandise from China-based factories.
“SHEIN’s operations in the PRC mean it is subject to the whim of the Chinese government, and by extension the Chinese Communist Party (CCP). In short, SHEIN is not a ‘global’ company. It is a China-based company,” Rubio wrote.
The GOP lawmaker noted that China’s financial securities and cyberspace regulators are monitoring SHEIN’s data-security practices to prevent leaks about its employees, suppliers, and contract manufacturers.
“SHEIN’s collaboration with Chinese regulators raises serious doubts that its IPO filings are complete and accurate,” Rubio wrote. “As I have written to you in the past, those very regulators order Chinese companies to deceive U.S. authorities and investors about the risks of doing business in the PRC.”
Chinese authorities oversee companies to ensure they don’t provide information that will “misrepresent or disparage” laws, policies, the business climate or the legal system in China, according to Rubio.
Rubio told Gensler that the SEC should compel SHEIN to disclose the following:
- That a majority of its operations are in China and thus “subject to the whim” of the CCP.
- That the Chinese government can change laws and regulations “without notice,” which “could destroy SHEIN’s business overnight if it falls out of favor with the CCP,” but also that because of China’s legal system, judicial proceedings can become protracted, which threatens “to mire SHEIN in legal disputes and divert resources away from its core business.”
- That China’s economy has sustained “adverse” effects because of deflation and a housing-bubble-induced financial crisis, which could harm SHEIN’s many Chinese employees, suppliers, and contract manufacturers.
- That SHEIN has sold clothing derived from cotton produced by the CCP’s “slave labor.”
- That SHEIN has infringed the copyrights of its competitors in the apparel industry, which made the company subject to lengthy and costly legal battles.
“Investors deserve to know the truth about SHEIN,” Rubio wrote.
“These disclosures are true and essential for anyone to fairly appraise the risk of investing in SHEIN. It is reasonable to ask whether any company so closely tied to an adversary nation should be able to raise funds in our capital markets, but as long as they are, transparent and exhaustive disclosures are the minimum price of admission.”
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