Fashion company Shein is seeking Beijing’s nod to go public in the US to comply with new listing rules for local firms, two sources with knowledge of the matter said, a decision it has made despite efforts to push its global credentials.

The move could delay the fast-fashion giant’s plans for its initial public offering which is likely not only to face tougher-than-expected scrutiny from US regulators in an election year, but also have to go through a lengthy approval process with numerous Chinese regulators.

Shein confidentially filed to go public in the United States in November and could launch its new share sale in 2024, in what is likely to be one of the most valuable China-founded companies to list in New York, Reuters has reported citing sources.

In the same month though, Shein also filed with the China Securities Regulatory Commission for the US float, making it subject to Beijing’s new listing rules for Chinese firms going public offshore, said the sources.

That move, which has not been reported before, puts into question Shein’s efforts over the years to distance itself from China and position itself as a global company which included moving its headquarters to Singapore from Nanjing, capital of China’s eastern Jiangsu province.

Shein did not immediately reply to a request for comment on Friday, and neither did the CSRC.

The new Chinese listing rules that came into effect in March last year stipulate that local firms wanting to list in offshore markets will need to make a filing with the CSRC and receive clearance from domestic regulators before proceeding.

One of the two sources cautioned that Beijing-Washington tensions in a US election year would also likely thwart Shein’s hopes of listing in New York in the near future.

The sources declined to be identified as they were not authorised to speak to media.

Under the CSRC rules, a host of authorities such as the National Development and Reform Commission, which supervises foreign holdings in local firms, the cybersecurity regulator and other industry regulators may get involved in approving offshore IPO applications.

The involvement of more regulators beyond the securities regulator could lead to more uncertainty as some agencies have different priorities such as national security or data protection, bankers have said.

According to the new rules, if an issuer has 50 percent or more of its operating revenue, profit, total assets or net assets generated in mainland China and meanwhile the main parts of its business activities are conducted in the country or senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled on the mainland, it would be recognised as a Chinese company and subject to the new rules.

The rules also say that the determination of whether the company is a Chinese one going public offshore should be made on “a substance over form” basis - which lawyers and bankers have said gives the CSRC discretion.

Founded by Chinese entrepreneur Chris Xu in China in 2012, Shein has since grown into a global fashion marketplace, serving customers in more than 150 countries and employing with more than 11,000 people, as per its website.

The company, known for its cheap mass-market fashion, produces clothing in China to sell online in the United States, Europe and Asia excluding China.

It does not own or operate any manufacturing facilities and instead works with around 5,400 third-party contract manufacturers, mainly in China. It ships the majority of its products directly from China to shoppers by air in individually addressed packages.

By Julie Zhu and Anirban Sen; Additional reporting by Kane Wu; Editing by Sumeet Chatterjee and Elaine Hardcastle

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