PDD, Shein, Binance: Why some of China’s most successful companies are desperate to hide their roots
Binance, the world’s largest cryptocurrency exchange, doesn’t want to be called a Chinese company.
It was founded in Shanghai in 2017 but had to leave China just a few months later because of a major regulatory crackdown on the industry. Its origin story remains an albatross for the company, says CEO Changpeng Zhao, better known as CZ.
“Our opposition in the West bends over backward to paint us as a ‘Chinese company,’” he wrote in a blog post last September. “In doing so, they don’t mean well.”
Binance is one of several privately owned, consumer-focused companies that are distancing themselves from their roots in the world’s second largest economy even as they dominate their respective fields and reach new heights of international success.
In recent months, PDD — the owner of online superstore Temu — has moved its headquarters nearly 6,000 miles to Ireland, while Shein, the fast fashion retailer, has moved to Singapore.
The trend comes at a time of unprecedented scrutiny for Chinese businesses in the West. Experts say the treatment of companies such as TikTok, owned by Beijing-based ByteDance, has served as cautionary tales for businesses deciding how to position themselves abroad and has even led to the recruitment of foreign executives to help curry favor in certain markets.
“Being [seen as] a Chinese company is potentially bad for doing global business and comes with a variety of risks,” said Scott Kennedy, a senior adviser and trustee chair in Chinese business and economics at the Center for Strategic and International Studies.
“It may affect your image, it may affect how regulators around the world literally treat you and your access to credit, markets, partners, in some cases land, raw materials.”
Where are you really from?
Temu, the online marketplace that has grown rapidly in the United States and Europe, casts itself as a US company owned by a multinational firm. The firm is Boston-based and its parent, PDD, lists its head office as Dublin. But it wasn’t always the case.
Until earlier this year, PDD was headquartered in Shanghai and known as Pinduoduo, also the name of its hugely popular e-commerce platform in China. But in the last few months, the company changed its name and moved to the Irish capital, without providing an explanation.
Shein, meanwhile, has long played down its origins.
In 2021, as the online fast fashion giant gained popularity in the United States, its website did not mention its backstory, including the fact that it first launched in China. Nor did it say where it was based, stating only that it was an “international” firm.
Another Shein corporate webpage, which has since been archived, lists frequently asked questions, including one about its headquarters. The company’s answer outlined “key operation centers in Singapore, China, the US and other major global markets,” without directly identifying its main hub.
Now, its website clearly states Singapore as its headquarters, alongside “key operation centers in the US and other major global markets,” without mentioning China.
As for Binance, there are questions about whether its lack of a physical global headquarters is a deliberate strategy to avoid regulation. In addition, the Financial Times reported in March that the firm had obscured its links to China for years, including the use of an office there until at least the end of 2019.
In a statement this week, Binance told CNN that the company “does not operate in China, nor do we have any technology, including servers or data, based in China.”
“While we did have a customer service call center based in China to service global Mandarin speakers, those employees who wished to remain with the company were offered relocation assistance starting in 2021,” a spokesperson said.
PDD, Shein and TikTok did not respond to requests for comment on this story.
It’s easy to see why companies are taking this approach.
“When you talk about corporate entities that are seen as being in one way or another connected to China, you sort of start opening this can of worms,” said Ben Cavender, a Shanghai-based managing director of strategy consultancy China Market Research Group.
“There’s almost this automatic take by the US government that these companies are potentially a risk,” because of the inference that they could share data with the Chinese government, or act in a nefarious capacity, he added.
Huawei was the primary target of the political backlash a few years back. Now, consultants point to TikTok, and the ferocity with which it has been questioned by US lawmakers over its Chinese ownership and potential data security risks.
The thinking goes that since the Chinese government enjoys significant leverage over businesses under its jurisdiction, ByteDance and thus indirectly, TikTok, could be forced to cooperate with a broad range of security activities, including possibly the transfer of data about its users. The same concern could, in theory, apply to any Chinese company.
“I think downplaying their roots allows them to navigate these tensions and build relationships with US customers and regulators,” said Garrett Sheridan, CEO of corporate advisory firm Lotis Blue Consulting.
“Against that backdrop, if you’re a Chinese entrepreneur and your goal is to maximize your access to consumers … it’s smart to try to make your company more multinational, more international and less kind of China-centric.”
The risks for companies are rising as policymakers increasingly scrutinize whether a company is Chinese or has Chinese owners. Back in mainland China, a range of companies have faced regulatory pressure due to a yearslong crackdown, which seems now to be tapering off.
As US-China geopolitical tension remains high, the American government has imposed restrictions on the sale of advanced technology, particularly semiconductors, to Chinese-linked firms.
America’s allies in Europe have taken similar action, recently blocking two chip deals over their links with China.
There is a risk of being stigmatized “even when they have a very remote linkage to China,” said Guoli Chen, professor of strategy at INSEAD business school.
He noted that in 2020, India banned more than 200 mostly Chinese apps. The move was condemned by the Chinese government, which dismissed India’s grounds of protecting national security as “an excuse” to target businesses with Chinese ties.
Binance’s Zhao also implied there could be prejudice at play. In his blog post, he pushed back on media descriptions of him as a “Chinese Canadian CEO,” saying: “I am a Canadian citizen, period.”
“The inference is that because we have ethnically Chinese employees, and perhaps because I am ethnically Chinese, we are secretly in the pocket of the Chinese government,” Zhao wrote. “This is obviously not true.”
There is a potential risk of “racism or general xenophobia” clouding some perceptions of Chinese-led companies, Cavender said.
In 2020, former US House Speaker Nancy Pelosi erroneously called Zoom
(ZM) a “Chinese entity” in a television interview, leading critics to point out that it was an American company.
That year, CEO Eric Yuan told CNN that if US-China tensions grew, Zoom could have to rethink its relations to China, where it had a research center. “If things get worse, we do have a plan,” he said.
Consumers, though, appear to be shrugging off the issue. As of last month, four of the five most popular US apps were developed by Chinese-linked companies, according to Apptopia.
But for the companies themselves, perception matters, especially the person fronting the firm.
In 2020, TikTok poached Disney’s streaming chief Kevin Mayer to become its CEO, in what was widely seen as an attempt to cozy up to Washington by enlisting an American executive from an iconic US company.
Mayer didn’t last long, quitting less than four months later as former President Donald Trump threatened to ban the app.
A year later, TikTok tapped Shou Chew for the role, prompting speculation that one reason he was chosen was “precisely because he was not Chinese,” noted Kennedy from CSIS. Chew is an ethnically Chinese citizen of Singapore.
According to Cavender, more Chinese companies are seeking to hire foreign executives, partly “because they realize that they need to have that diversity at the management level from an optics standpoint.”
That’s one of their “biggest asks right now,” he said.
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