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Amid new tensions between China and the US, Shein’s Reliance transaction is tense at the edges: Report

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As Beijing advises domestic companies to refrain from moving production abroad in the wake of escalating trade tensions with the US, Chinese fast fashion giant Shein is reconsidering and potentially reducing its global sourcing partnership with Reliance Retail, according to the Economic Times (ET), which cited people familiar with the situation.

Announced in 2023, the partnership sought to establish India as a manufacturing hub for Shein’s worldwide supply chain. But after Washington increased taxes on Chinese imports, China pushed to keep production in the country, and the strategy is now being reviewed. Beijing was worried that manufacturers would move their operations to lower-tariff nations like India after the former US President Donald Trump’s administration imposed a high 145% tariff on Chinese goods.

The initial agreement between Shein and Reliance is being reevaluated because of the changing geopolitical landscape, an executive with knowledge of the ongoing discussions told ET. The relationship was created with the intention of using India to create a worldwide supply base. “That is now in jeopardy,” the individual stated. Another source claims that both businesses are looking into possible ways to get around new Chinese government advisories that discourage offshore manufacturing.

Shein was previously banned in 2020 as part of a larger crackdown on Chinese apps due to border tensions. Shein returned to India early this year through a standalone app run by Reliance Retail Ventures. Its return was seen as a calculated move that would allow Indian MSMEs to access Shein’s global fashion supply chain in addition to being a strategic move for retail. Up to 25,000 Indian MSMEs were to be onboarded as part of the strategy, which also called for sharing Shein’s manufacturing technologies and knowledge. But the most recent events raise questions about how much Shein has committed to procuring from India.

Shein still depends mostly on Chinese manufacturing even after moving its headquarters to Singapore. Even if they manufacture in India for the home market, Chinese electronics businesses like Oppo and Vivo have not made the same worldwide shifts as Western corporations like Apple, who are increasingly shifting production to India. Strict data separation guidelines were incorporated into the Shein-Reliance agreement. Earlier this year, Commerce Minister Piyush Goyal made it clear that Shein has no access to or control over customer data and that the app infrastructure is wholly controlled by India.

Shein’s recent decline in profitability serves as the context for this development. International reports peg its net profit at $1 billion in 2024, down about 40% from the previous year, but revenues grew 19% to $38 billion. Meanwhile, India’s fast fashion business is undergoing tremendous expansion. The business, which is currently valued at about $10 billion, could quintuple to $50 billion by 2030–31, according to a report by Redseer Strategy Consultants. In FY24, fast fashion alone expanded 30–40%, exceeding the meager 6% increase in the fashion industry as a whole.

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