(News Bulletin 247) – The fast-fashion group which filed an IPO project last fall on Wall Street is the subject of an examination by the powerful Chinese internet regulator over the management of its data. Which risks delaying its arrival on the coast.

Will Shein’s arrival on Wall Street be compromised by Beijing? The fast-fashion specialist filed a confidential IPO plan last fall on Wall Street with the Securities and Exchange Commission (SEC), the American stock market watchdog.

But since then, the powerful Chinese internet regulator, the Cyberspace Administration of China (CAC), has opened an investigation into the clothing specialist, the Wall Street Journal reported Tuesday evening, citing sources close to the matter.

The CAC is, according to the American business daily, examining Shein’s management of its personal data, such as information on its employees, suppliers and partners in China. The regulatory body would also seek to know whether the Chinese group is capable of protecting any leak of this data abroad.

>> Access our exclusive graphic analyses, and gain insight into the Trading Portfolio

Valuation of $90 billion

“Beijing is also interested in the type of Chinese data that Shein will disclose to the US financial markets regulator when it seeks to list on the New York stock exchange,” explains the Wall Street Journal.

This investigation is hardly timely for Shein, which is aiming for a significant valuation on the stock market, namely more than $90 billion according to Bloomberg, or more than 32 of the 40 stocks in the CAC 40.

Previous investigations of the same nature by the CAC had taken months to be completed and to the extent that Shein needs Beijing’s approval to enter Wall Street, the group’s arrival on the American coast could be largely delayed or even simply thrown into oblivion, explains the Wall Street Journal.

The previous cases are in any case cause for alarm. The VTC services specialist Didi listed on the stock market in June 2021 and, two days later, the CAC launched an investigation, which forced Didi to almost withdraw from Wall Street.

In the same vein, Tik Tok’s parent company, ByteDance, shelved its IPO plan in 2021 after Chinese regulators suggested it implement efforts to limit cybersecurity risks.

Foreign investors burned by China

Let’s also not forget the e-commerce giant Alibaba, one of the recurring victims of Beijing’s interference in tech groups. In 2021, the company was fined $2.75 billion for anticompetitive practices. Chinese authorities had previously blocked the IPO of fintech Ant, a subsidiary of Alibaba, at the end of 2020.

More broadly, the threat of a delay of several months in Shein’s IPO once again illustrates the enormous political risk for listed groups and investors in China.

If the tech giants are regularly mistreated by Beijing, the Chinese authorities can very quickly act on other sectors. This was, for example, the case for private education in 2021 or more recently for video games. In December, the enactment of draft rules aimed at limiting expenses and time spent by players on mobile games caused the fall on the stock market of several Chinese players in the sector, including the juggernaut Tencent.

This national political risk adds to the recurring tensions (or “structuring” to use the expression used by Emmanuel Macron on Tuesday evening) between the United States and China on the subjects of digital sovereignty, which have pushed Washington to restrict exports of Nvidia graphics processors to China.

This is also one of the factors that can explain the recent disenchantment of foreign investors with China, where stock indices plunged in 2023 and continue their fall this year. According to a recent Bank of America survey, managers are significantly underweight China, with a difference between those saying they are overweight the region and those saying they are underweight it of -20. This is simply the lowest figure among all countries in the Asia-Pacific region.