Shein and Temu the latest China tech targets in Congress body's sights

As the U.S. becomes increasingly wary of China's growing influence on the Western tech stage, internet platforms from TikTok to Shein are finding themselves in Washington's sights.

As a Chinese saying goes: the first bird that pokes its head out gets shot. In recent months, lawmakers in the U.S. have escalated efforts to ban TikTok. In December, the U.S. House of Representatives ordered its staff and lawmakers to delete the video app from their government-issued mobile. A broader restriction appears to be looming after the app's CEO Shou Zi Chew went through five hours of grilling questions before Congress in late March.

Now Temu and Shein, two fast-growing ecommerce platforms that leverage China's efficient supply chains to ship affordable goods to American consumers, are facing heightened scrutiny from Washington.

The U.S.-China Economic and Security Review Commission (USCC), a government organ created by Congress to report on the national security implications of the bilateral trade and economic relationship between the two countries, published a report detailing the "challenges" presented by Chinese fast fashion platforms.

Those challenges include "exploitation of trade loopholes; concerns about production processes, sourcing relationships, product safety, and use of forced labor; and violations of intellectual property rights."

The report, which came out last Friday, singles out Shein and Temu as two foremost examples posing such risks to America.

These concerns have been flagged before. For instance, Rick Helfenbein, former chairman of the Board of the American Apparel & Footwear Association, wrote back in 2021 that Shein and other similar direct-to-consumer ecommerce players managed to take advantage of the U.S. de minimis import exemption, which allows $800 per person per day to be free of tariff.

But as Shein and Temu gain further ground in the U.S., their influence inevitably draws more attention. Shein was the most downloaded shopping app in the U.S. last year, overtaking Amazon; Temu, which is the sister app of China's online deals giant Pinduoduo, managed to climb to the top of the U.S. app stores in the course of a few weeks.

Shein responded to the USCC report in a statement: "As a global company with customers and operations around the world, Shein takes visibility across our supply chain seriously. For over a decade, we have been providing customers with on-demand and affordable fashion, beauty and lifestyle products, lawfully and with full respect for the communities we serve."

Temu did not immediately respond to a request for comment.

The fact that Shein is in the crosshairs of USCC goes to show the difficulty of trying to play down one's China links. In an effort to shun the impact of geopolitical tensions, Chinese companies expanding in the West feel increasingly pressured to disassociate themselves from home. Many Chinese startups have expressed to TechCrunch their angst about being trapped in geopolitics while trying to build a genuinely competitive global product.

As I wrote before, many of them are now moving their main entity abroad and even securing foreign citizenship for their executives, aside from basic practices like storing user data in the target markets rather than China.

In Shein's case, the fast fashion behemoth, which was founded in Nanjing and Guangzhou a decade ago, has made Singapore the home of its de factor holding company; its founder and CEO Sky Xu also reportedly became a permanent resident of Singapore, a country seen as politically neutral and favored as an overseas outpost by Chinese tech bosses for its cultural and geographic vicinity.

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