Opinion: Marco Rubio Is Right To Put Shein IPO Under Microscope. California’s Leaders Should Do The Same.

Shein has become the latest fast-fashion company to romance Gen Z with cheap prices, savvy marketing, and the release of a staggering number of new items daily. But while the online-only retailer has proven to be wildly seductive for millions — recently announcing it doubled its profits in 2023 — Sen. Marco Rubio (R-FL) isn’t among the smitten. And with bipartisanship in short supply these days, California’s Democratic senators should follow Rubio’s lead.

Earlier this year, Rubio asked the U.S. Securities and Exchange Commission to block the China-founded company’s bid for an initial public offering (IPO) in the United States unless the retailer makes additional “enhanced” disclosures about its business operations. Rubio should be commended for stepping up to protect U.S. investors. Now, his colleagues in the Senate on both sides of the aisle, including Sens. Laphonza Butler and Alex Padilla, should follow suit in pushing for answers and transparency from Shein. Because beneath Shein’s sheen lies some deep-rooted rot with massive implications for data privacy, human rights, and the competitiveness of domestic manufacturers.

To attract investors, Shein moved its corporate headquarters to Singapore in a bid to distance itself from the Chinese Communist Party. It’s a gambit that may pay off in the U.S., as the company has reportedly tapped Goldman Sachs, J.P. Morgan, and Morgan Stanley to be key underwriters of the deal, which is reportedly valued at up to $55 billion.

But the relocation is mere window dressing and doesn’t indicate a break from China or its Communist Party rulers. Shein still employs thousands of people in the authoritarian nation while sourcing, manufacturing, and shipping most of its apparel from a massive network of Chinese factories, as Rubio noted in a letter to the SEC. Shein’s collaboration with Chinese regulators, as well as its decision to seek approval from Beijing for the offering, further raises serious doubts that its IPO filings are complete and accurate.

Shein’s IPO should send a chill down the spine of every American no matter where they are on the political spectrum.

Like with TikTok, TaoBao, and Pinduoduo, to name just a handful of China-founded companies, the open questions surrounding Shein’s ties to the Chinese Communist Party raise serious concerns about the amount of personal data the company is collecting on Americans — particularly of younger consumers who are unaware of the dangers of providing their information.

Ultimately, this massive data collection operation could dump sensitive information directly into the hands of foreign adversaries, who could then use it for nefarious purposes.

There’s also the human rights abuses.

Shein has been accused by a bipartisan group of U.S. lawmakers of using forced labor from China’s Xinjiang Uyghur Autonomous Region throughout its supply chain. Analysis has shown that cotton used to make Shein clothes has been sourced from Xinjiang region, which would violate American laws banning the importation of products from that area. Meanwhile, reports have also found employees working 75-hour weeks in unsafe Chinese factories that lack windows and emergency exits — violating Chinese labor laws.

Additionally, domestic manufacturers will continue to be undercut if Shein is able to expand its investor base in the U.S. by going public. Shein’s alleged use of forced labor and its ability to skirt import taxes — along with accusations of IP theft — allow it to vastly undercut American manufacturers and other fashion companies. This means that small American designers are operating at a deep disadvantage, one that will only grow as competitors continue to pay billions of dollars in taxes annually that Shein is able to avoid.

Navigating the relationship with China requires finding the right balance between economic opportunities and national security. But sitting idly by as Shein attempts to list publicly sends the wrong message to regulators, businesses, and the American public: That we’re willing to let companies engaged in widespread unlawful conduct that is damaging to U.S. interests skirt our own rules at the expense of the American people. That’s something that should never be in fashion.

Senator Rubio should be commended for taking a stand and calling on the SEC to block Shein’s IPO. Now, Sens. Butler and Padilla have a rare opportunity to bring some bipartisanship to the Senate by joining Rubio’s call to stop Shein and protect American interests.

Ike Brannon is a senior fellow at the Jack Kemp Foundation and a former senior economist for the United States Treasury and U.S. Congress.

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