Shein is scaling back its operations in Vietnam and once again strengthening its manufacturing base in China. This is not merely a logistical adjustment, but a sign that moving production out of China does not always yield the expected benefits.
According to Reuters, the company is currently utilising around 6 of the 15 hectares of its leased complex near Ho Chi Minh City, and has been cutting staff since April. Vietnam was intended to reduce Shein’s dependence on China and mitigate the effects of trade tensions. However, the operational model proved to be the problem. Shein relies on small batches, rapid demand testing and the almost immediate scaling up of production for popular items. The Chinese supply chain continues to offer greater scale and flexibility.
At the same time, the regulatory environment has changed. In the US, duty-free treatment for de minimis shipments from China and Hong Kong came to an end in May 2025. In the first quarter of 2026, Shein’s US revenue fell by 14.3 per cent to $2.04 billion, and the company recorded a loss of $99 million, partly due to a one-off accounting charge.
Pressure is also mounting in Europe. From 1 July 2026, the EU has been levying a provisional duty of €3 per item on parcels valued at up to €150.
A return to China could therefore improve the speed and efficiency of the supply chain, but it increases Shein’s exposure to geopolitical and tariff risks. This is significant ahead of its planned IPO in Hong Kong. According to the *Financial Times*, advisers are sounding out investors at a valuation of less than $30 billion, whereas in 2022 Shein was valued at over $100 billion.
The case of Shein shows that the competitive edge of e-commerce today depends not only on apps and data, but also on the entire ecosystem of manufacturing, logistics and regulation.
