“After U.S. and UK Setbacks, Hong Kong Beckons”: Shein Cuts Valuation for IPO—Could It Power a Financial-Market Revival?

Shein’s Hong Kong IPO Push Following Failed U.S. and UK Listings
Valuation Plunge Amid Listing Delays and Successive Western Crackdowns
Hong Kong’s Revival as a Financial Hub Through a Wave of Chinese Listings

Chinese fashion platform SHEIN is preparing to list on the Hong Kong stock exchange. After political and regulatory risks repeatedly derailed its listing plans in the United States and the United Kingdom, the company pivoted to Hong Kong, a market enjoying policy support from Beijing. Market observers say the initial public offering (IPO) amounts to a second-best option for Shein after its access to Western capital markets was blocked. For Hong Kong, however, the deal could provide a pivotal opportunity to consolidate its recovery as the city rapidly reclaims its standing as a global financial hub.

Shein’s Hong Kong Listing Push

According to a July 12 report by Reuters, the China Securities Regulatory Commission (CSRC) announced on its website on July 10 that Shein Global Holdings had received approval to issue up to 341.6 million H-shares, or shares issued by mainland Chinese companies and listed and traded on the Hong Kong Stock Exchange. Sources familiar with the matter said the CSRC’s approval had been reported to the highest levels of the Chinese Communist Party leadership, with the listing expected to take place between September and October this year. Shein is reportedly targeting a valuation of between $40 billion and $50 billion in the IPO. That would amount to less than half of its peak valuation of $100 billion in 2022.

The steep decline in Shein’s valuation stems from prolonged delays in its listing process. Shein first prepared to list on the New York Stock Exchange in 2020 but shelved the plan amid U.S.-China tensions and volatile market conditions. The listing process resumed in January 2022 but was suspended after just one month as Russia’s invasion of Ukraine intensified volatility across global stock markets. Shein launched a third attempt in November 2023 by confidentially filing for an IPO with the U.S. Securities and Exchange Commission (SEC), only to encounter renewed obstacles after U.S. lawmakers raised concerns over alleged forced labor in China’s Xinjiang Uyghur Autonomous Region. Since June 2022, the United States has enforced the Uyghur Forced Labor Prevention Act (UFLPA), which presumes that goods produced in Xinjiang were made with forced labor and prohibits their importation. Congress pressed Shein to provide sufficient disclosure regarding its use of Xinjiang cotton and its supply-chain traceability systems, while the SEC reportedly demanded the submission of a public registration statement rather than a confidential filing.

Shein subsequently abandoned its U.S. listing plan in effect and turned to the London Stock Exchange, confidentially filing for a listing with the UK Financial Conduct Authority (FCA) in June 2024. The FCA approved the listing proposal in April last year despite opposition from local civic groups, but the CSRC did not grant the approval required for Shein to list overseas. The stumbling block was reportedly Shein’s disclosure in its UK prospectus that links between its supply chain and Xinjiang constituted a “risk factor.” Shein ultimately halted its London listing efforts in May last year and launched a bid to list in Hong Kong.

Profitability Red Flags in U.S. and EU Markets

Successive regulatory measures imposed by Western governments are also regarded as a major factor behind the erosion of Shein’s valuation. The most immediate burden emerged in the U.S. market. Shein had secured its price competitiveness by shipping low-cost apparel produced at Chinese factories directly to U.S. consumers in individual parcels. The company made extensive use of the U.S. de minimis exemption, which waived tariffs on imported goods valued at no more than $800. However, after the Donald Trump administration abolished duty-free treatment for low-value parcels originating from China and Hong Kong in May last year, Shein’s products became subject to tariffs and customs-clearance costs. The shift has made it effectively impossible for the company to maintain the ultra-low-cost direct-shipping model it previously relied upon.

Pressure targeting the same delivery model is also intensifying in Europe. The European Union had exempted goods valued at no more than approximately $172 and shipped directly from outside the bloc to consumers from customs duties. Recently, however, concerns have grown that the exemption created an unfair competitive environment for businesses within the bloc and impeded customs authorities’ product-safety inspections. The EU consequently abolished the system on July 1 and began imposing a temporary tariff of approximately $3.40 per item through July 2028. If the regulatory stance tightens further, standard product-specific tariffs and separate parcel-processing fees could also be introduced.

Regulatory pressure beyond tariffs is also mounting. In May last year, the European Commission and consumer-protection authorities in EU member states released the findings of a joint investigation concluding that Shein had misrepresented sales deadlines, discount rates and low-stock notices while failing to provide complete information about customers’ return and refund rights. If Shein fails to comply with demands for corrective action, authorities in individual member states may impose fines based on the company’s annual revenue generated in their respective countries or order changes to its business practices.

Pressure under the Digital Services Act (DSA), the bloc’s legislation regulating Big Tech companies, is also becoming increasingly visible. Shein was designated a “very large online platform” in the EU—and therefore made subject to the DSA—in April 2024. The Commission is currently conducting a formal investigation into Shein under provisions of the DSA. The inquiry focuses on △ systems designed to prevent the sale of illegal and harmful products, △ addiction risks arising from design features that encourage repeated visits and purchases through mechanisms such as check-in rewards and loyalty points, and △ the transparency of personalized product-recommendation algorithms. The Commission is also examining indications that illegal products, including weapons and adult dolls modeled after children, have been sold on Shein.

Revival of Hong Kong’s Financial Market

Market observers regard Shein’s IPO as little more than a second-best option for the company, but a potentially significant boon for Hong Kong’s financial market. Since the beginning of the 2020s, Hong Kong’s position in the global IPO market had steadily diminished. Doubts about the stability and autonomy of its financial market mounted after Beijing imposed the Hong Kong National Security Law in June 2020. A string of additional headwinds—including mainland China’s crackdown on Big Tech companies, a protracted property-market downturn and U.S.-China tensions—substantially weakened foreign investors’ appetite for China-related assets. As a result, the total market capitalization of Hong Kong’s stock market plunged 17%, from approximately $3.94 trillion at the end of 2022 to about $3.27 trillion at the end of 2023.

The tide began to turn in 2024. The Chinese government tightened its management and oversight of mainland stock markets while announcing plans to actively develop Hong Kong as an overseas fundraising gateway for Chinese companies. At the time, the CSRC pledged to support IPOs by major Chinese companies in Hong Kong and expand cross-market trading arrangements between mainland exchanges and the Hong Kong Stock Exchange. The range of securities eligible for trading under the Shenzhen-Hong Kong Stock Connect and the Shanghai-Hong Kong Stock Connect was subsequently expanded substantially. The changes lowered barriers to Hong Kong market access for mainland Chinese investors while allowing Hong Kong-listed companies to tap a more diverse pool of investment demand. The Hong Kong Stock Exchange also shortened its listing-review process as part of an active campaign to attract Chinese companies. Most notably, it reduced the review period for high-quality companies meeting designated requirements to approximately 30 business days, enabling them to raise capital more quickly than on mainland exchanges.

Hong Kong’s stock market has since rapidly regained its former stature. According to the Korea Center for International Finance (KCIF), companies listing in Hong Kong raised approximately $36.6 billion through IPOs last year, more than twice the amount recorded a year earlier. The number of companies listing on the Hong Kong Stock Exchange during the same period surged by more than 70% to 117. Notable successful listings included △ Chinese battery manufacturer CATL in May, △ gold-mining company Zijin Gold in September, △ construction-equipment manufacturer Sany Heavy Industry through a dual listing in October, and △ electric-vehicle manufacturer Seres Group in November.

Hong Kong’s broader financial market has also regained momentum on the back of the stock-market rally. According to Boston Consulting Group (BCG), assets under management in Hong Kong from offshore high-net-worth individuals increased 11% year over year to $2.95 trillion last year, surpassing Switzerland for the first time. BCG estimated that approximately 59% of the assets currently managed in Hong Kong originate from mainland China and forecast that the proportion would rise to 68% by 2030. The acceleration of Asia’s generational wealth transfer, in which wealth accumulated through economic growth is passed to the next generation, is expected to drive an even greater movement of assets across the region.