These hugely successful companies were born in China. They don't want you to know that

Hong Kong CNN

Binance, world's biggest cryptocurrency exchange, does not want to be called Chinese.

The company was founded in Shanghai, China in 2017, but it had to leave China a few short months later due to a massive regulatory crackdown. The company's origin story is a major problem, according to CEO Changpeng Zhao (also known as CZ).

In a September blog post, he said: 'Our opponents in the West bend over backwards to paint us as "Chinese companies". In doing so, they do not mean well.

Binance is among a number of privately-owned, consumer-focused businesses that are edging away from their roots within the second largest economy in the world even as they reach new levels of success internationally.

PDD, owner of the online superstore Temu, moved its headquarters to Ireland in recent months. Shein, a fast fashion retailer from Singapore, also moved.

This trend is occurring at a moment when Chinese businesses are being scrutinized in the West like never before. Experts claim that the treatment of TikTok by Beijing-based ByteDance has been a cautionary tale for companies deciding on how to position themselves overseas and has led to the hiring of foreign executives in order to curry favor with certain markets.

Scott Kennedy, senior adviser and trustee-chair in Chinese economics and business at the Center for Strategic and International Studies, said that being perceived as a Chinese firm could be detrimental to doing business globally.

It may affect your reputation, and how regulators in other countries treat you, your credit access, your partners, your markets, your raw materials, or even your land.

What is your real origin?

Temu, an online marketplace which has rapidly grown in the United States, Europe and Asia, presents itself as being owned by a US multinational. The company is based in Boston, and its parent PDD lists Dublin as its headquarters. It wasn't always like this.

Pinduoduo was the name given to PDD's hugely successful e-commerce platform, which is based in China, until earlier this year. In the last few weeks, PDD changed its name to Pinduoduo and relocated to Dublin, without giving any explanation.

Shein has been downplaying its origins for a long time.

The website of the fast fashion online giant did not mention the company's history, or that it was founded in China, in 2021. It did not say where the company was located, only stating that it was an "international" firm.

A Shein webpage that has been archived lists frequently asked question, one of which is about the company's headquarters. The answer provided by the company listed 'key operations centers' in Singapore, China and the US, without identifying its primary hub.

Its website now clearly lists Singapore as its headquarter, along with 'key operations centers in the US, other major markets around the world,' but does not mention China.

Binance's lack of a global physical headquarters raises questions as to whether it is a deliberate attempt to avoid regulation. The Financial Times reported that Binance had been hiding its ties to China, including using an office in China until at least 2019.

Binance said in a statement to CNN this week that it 'doesn't operate in China nor do we have technology, servers, or data based in China.

A spokesperson stated that 'while we had a call center in China for global Mandarin speakers to serve, employees who wanted to stay with the company received relocation assistance beginning in 2021.

PDD, Shein, and TikTok have not responded to requests for comments on this story.

Understanding strategy

This is a very common approach.

Ben Cavender is the managing director of China Market Research Group, a strategy consultancy based in Shanghai.

He added that the US government has a tendency to assume that these companies could be a threat, because they might share information with the Chinese government or act in an unsavory manner.

Huawei was the main target of political backlash in the past few years. Consultants point out that US lawmakers have been questioning TikTok with ferocity over its Chinese ownership, as well as potential data security concerns.

ByteDance, and indirectly TikTok as well, are thought to be under pressure from the Chinese government, who has significant influence over the businesses that fall under its jurisdiction. This could include the possible transfer of user data. The same concerns could theoretically apply to any Chinese firm.

Garrett Sheridan is the CEO of Lotis Blue Consulting, a corporate advisory firm. He said, 'I believe downplaying their origins allows them to navigate through these tensions, and build relationships with US regulators and customers.

If you are a Chinese entrepreneur, and your goal to maximize your consumer access is to expand your business internationally, it would be smart to consider making your company less China-centric and more international.

As policymakers scrutinize more closely whether a company has Chinese owners or is Chinese, the risks to companies are increasing. A number of mainland Chinese companies are facing regulatory pressure after a crackdown that lasted for years. This seems to be easing.

The US government, in response to the high geopolitical tension between the US and China, has placed restrictions on the sale, especially of semiconductors, by American-linked companies.

Heightened suspicion

Recently, America's allies have blocked two chip deals due to their links with China.

Guoli Chen is a professor of strategy at INSEAD Business School.

He said that by 2020, India would ban more than 200 apps, mostly Chinese. China condemned the move, dismissing India's claims of national security as an 'excuse' to target companies with Chinese ties.

Binance's Zhao suggested that there may be some prejudice involved. In his blog, Zhao disputed media descriptions that he was a "Chinese Canadian Chief Executive Officer," saying: "I am a Canadian, period."

Zhao wrote: 'The inference was that we were in the pocket (or pockets) of the Chinese government because we had ethnically Chinese staff and because I was ethnically Chinese. This is clearly not true.

Cavender stated that there is a risk of 'racism' or 'general xenophobia’ clouding perceptions about Chinese-led businesses.

In a 2020 television interview, Nancy Pelosi, the former US House Speaker, incorrectly called Zoom (ZM), a "Chinese entity". This led critics to note that Zoom was actually an American company.

In the same year, Zoom's CEO Eric Yuan said to CNN that, if tensions between China and the US grew, Zoom might have to reconsider its relationship with China, where they had a research centre. He said, 'If the situation worsens, we have a plan.'

Non-Chinese CEOs

The issue seems to be largely ignored by consumers. Apptopia reports that four of the top five US apps developed last month were by Chinese companies.

Perception is important for companies, and in particular the person who represents the company.

TikTok hired Disney's streaming chief Kevin Mayer as its CEO in 2020. This was widely perceived as an attempt by Washington to gain Washington's favor through the hiring of an American executive.

Mayer quit after less than four months when Donald Trump, the former president, threatened to ban this app.

Kennedy, from CSIS, noted that a year later TikTok chose Shou Chew to play the role. This sparked speculation about his selection being 'exactly because he wasn't Chinese'. Chew is a Singaporean citizen who is ethnically Chinese.

Cavender says that more Chinese companies want to hire foreign executives. This is partly because they are aware of the need for diversity in management.

He said that's their 'biggest request right now'.