When is a Chinese company not a Chinese company? Some of China’s most dynamic firms are distancing themselves from the world’s second-largest economy, after finding themselves subject to unwelcome scrutiny over their origins. 

Popular fast fashion brand Shein relocated its headquarters to Singapore in 2021. In April, it deregistered its original parent company in Nanjing. E-commerce platform Temu has been headquartered in Boston since its launch last September, while its parent company PDD Holdings moved its headquarters to Ireland in the first quarter of this year, according to its SEC filings. 

Corporations from Apple to Pfizer have long registered in foreign jurisdictions, often in order to reduce their tax burdens. Rarely, though, have companies moved abroad to rebrand their national identity. Such maneuvers complicate the question of what makes a firm Chinese, posing potential issues for their customers, suppliers and investors as they navigate increased restrictions in the U.S. and elsewhere on doing business with China.

“[Chinese] companies are motivated to move by the opprobrium and the sanctions risk,” says Lester Ross, chair of the American Chamber of Commerce in China’s Policy Committee. “They want to shed that image if they can, and in addition to that, to be seen as more global companies.”

While relatively few in number, the examples of Chinese companies relocating abroad are significant because these firms punch above their weight. “In some ways they’re isolated cases, but only because they’ve successfully branded themselves and are globally competitive,” says Roselyn Hsueh, an associate professor at Temple University specializing in China’s political economy. “As other Chinese indigenous industries are able to do that, they’ll also be more interested in having regional headquarters or having their headquarters based elsewhere.”

The highest profile Chinese corporation trying to redefine itself as a ‘global company’ is ByteDance, owner of social media platform TikTok. Executives frequently highlight the company’s international offices and ownership by global investors, while de-emphasizing its Chinese origins. The company says its shares are 60 percent owned by “global institutional investors,” including American venture capital and private equity firms such as Sequoia Capital, KKR, Carlyle and Fidelity, 20 percent by employees and 20 percent by its founders, though the founders exercise outsize voting rights.

But such claims have failed to convince skeptics in Washington. Lawmakers dismissed TikTok’s characterization of itself as a global enterprise when they interrogated chief executive Shou Zi Chew in March. The House Select Committee on the Chinese Communist Party has continued to investigate both Shein and Temu’s supply chain ties to China. A recent report by the committee accused the two firms of exporting goods made in Xinjiang with forced labor to the U.S. 

“No matter how they try to hide their ties to the Chinese Communist Party, make no mistake that these companies do Beijing’s bidding whether they are headquartered in Shenzhen or Dublin,” Senator Marco Rubio said in a statement to The Wire. 

[Chinese] companies are motivated to move by the opprobrium and the sanctions risk… They want to shed that image if they can, and in addition to that, to be seen as more global companies.

Lester Ross, chair of the American Chamber of Commerce in China’s Policy Committee

Less clear, is what the Chinese authorities think of these overseas relocations, which appear at odds with Beijing’s recent priorities including cracking down on capital outflows and discouraging offshore listings. 

For a company like Shein — which Reuters reported this week is in talks with investment banks about a potential initial public offering in the U.S., citing sources — relocating could pave the way for an easier listing process: By moving to Singapore, Shein isn’t subject to China’s strict new vetting regime for overseas listings. Nor would it have to adopt the controversial variable interest entity (VIE) corporate structure in order to skirt Chinese restrictions on foreign investment in certain sectors. 

One explanation for why companies like Shein and Temu can get away with headquartering overseas is because their core businesses aren’t as politically sensitive in China as those in other sectors. 

“Commerce or non-strategic industries like clothing… are not necessarily contributing to the national technology base,” Hsueh says. “They’re operating in sectors that are outside of the regulatory micromanagement of the Chinese government. So they have a lot more regulatory wiggle room to begin with.”

What’s more, neither company sells to Chinese customers, which could alleviate Beijing’s concerns about data security. PDD Holdings separately owns and operates the giant online retailer Pinduoduo, which caters to China’s domestic market. 

“China looks at [foreign] constraints imposed on Chinese companies as a major burden on China’s ability to do business,” Ross says. “So if a company can say to authorities that they really need to move overseas to reduce the risk their companies will be tainted, I think the authorities will understand that.”

Companies in sectors that Beijing considers more strategically important tend to face a harder time. For Chinese firms looking to establish a foothold in the U.S. without drawing as much regulatory heat, the idea of engaging in a ‘reverse technology transfer’ has gained some traction. Chinese battery maker CATL struck a deal in February to supply technology for a new battery plant being built by Ford in Michigan; automaker BYD is exploring a similar arrangement by spinning off part of its U.S. subsidiary and bringing on American investors, according to earlier reporting by The Wire.

It’s not clear that these arrangements will allay the concerns of policymakers in either country that motivated companies’ diversification push in the first place. 

One recurring concern expressed by U.S. lawmakers, for example, relates to the data collected by China-founded companies. Such concerns motivated Congress to ban funding by the Federal Transit Administration from going to Chinese companies like BYD in 2019, and are why it has turned on Temu and Shein, whose apps can allegedly harvest vast amounts of data on American consumers’ buying patterns, according to an April report by the U.S.-China Economic and Security Review Commission.

A recently proposed bill, which has received support from the White House, takes aim at the data collection practices of Chinese apps. The RESTRICT Act, introduced by Senator Mark Warner in March, would give the U.S. government broad power to regulate apps produced by companies based in ‘foreign adversary’ countries, including China. But it’s not clear that companies like Shein or Temu, which are now based overseas, would fall under its scope. 

“It underscores the difficulty of crafting legislation that targets a specific country,” says Martijn Rasser, managing director at Datenna, a China-focused data and intelligence provider. To target companies on a country-specific basis, “you’d have to have good insight into its share ownership structure in order to determine who ultimately controls the company. And that’s a time consuming process that can be readily contested in a court of law,” he says. 

“We need to craft legislation that addresses the concerns with the technology, regardless of who the owner is, otherwise we’ll keep tying ourselves in a knot on these issues,” he adds.

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