Temu: the new giant in E-commerce with a hidden cost

Temu has quickly conquered the market, reaching 90 million users in Europe alone and exceeding 50 billion euros in turnover. Following in the footsteps of Shein, it offers a vast range of products at rock-bottom prices, but behind this winning formula lies a system in which someone pays the bill and someone else collects mind-blowing figures

We all know the story by now: Chinese companies seem to emerge from nowhere and, in no time at all, generate staggering revenues. This was the case for Shein, and now it’s Temu’s turn. The online shopping platform made its debut in Italy in April 2023 and already boasts 90 million users across Europe. While in the United States as of September 2022, it has seen remarkable growth. As of July 2023, it had 77.3 million monthly active users in the United States. This number has grown to 100 million as of September 2024, making it one of the most downloaded shopping apps in the country.

Despite its young age, Temu has grown to become an e-commerce giant with revenues of more than $54 billion. It retails anything and everything at rock-bottom prices ranging from tech accessories and clothes to cosmetics and furniture. However, there is always a cost for these lowest-of-the-low prices, and someone is always footing the bill while others make astronomical profits.

The European Union investigation

Temu is under scrutiny by the European Union for breaking consumer protection laws. Brussels accuses the platform of not doing enough to prevent the sale of harmful or illegal products. Temu could face a hefty fine of up to 6% of its global turnover if found guilty.

Internet trade statistics draw an irrefutable picture: 4.6 billion low-value items worth less than $160 were imported into the EU during 2024, nearly double the number imported in 2023. Nine out of ten are from China, and during 2023, customs officials confiscated 17.5 million counterfeit goods.

The European Union is considering removing the tax-free package under €150 ($160), imposing a management fee to fund customs checks.

The United States position

Also in the United States, Temu’s activities are carefully watched. Regulators and members of Congress have eyed the low-cost model of the platform with suspicion, believing it is avoiding U.S. import duties and taxes. The Federal Trade Commission (FTC) is considering stricter regulation to make sure platforms like Temu adhere to consumer protection legislation and do not distribute unsafe or pirated products.

Also, American customs agents are monitoring the increasing amount of Chinese products passing through Temu. There have been concerns that the site is not adequately monitoring the safety and legality of the products it offers, and calls have been made for increased regulation. The U.S. is debating whether platforms like Temu are liable for the products they offer, like American e-commerce companies.

Who cashes in on the pprofits?

Now comes the significant question: where does Temu’s money go?

As the Italian journalist Milena Gabanelli defines, PDD Holdings is the firm that owns the platform, officially registered in Dublin but with headquarters in Shanghai and its fiscal and legal headquarters in the Cayman Islands. It is no coincidence that it is quoted on Nasdaq with a market capitalization of around $170 billion, bigger than Nike and nearly as big as Inditex (the parent company of Zara).

In charge of the empire is Colin Zheng Huang, a former Google engineer and one of China’s wealthiest individuals. And where do his share of profits end up? In the pockets of three financial institutions (Walnut Street Ltd, Walnut Management Ltd, Steam Water Ltd) and one family trust, all in the British Virgin Islands, one of the globe’s most infamous tax havens. The result? Tax-free billions in profits.

According to estimates, Huang controls 34.6% of the shares and 60% of the voting rights in PDD Holdings, which means his own wealth is more than $60 billion, way above Forbes’ estimated $43 billion.

Temu, TikTok, and Shein: the same tax scheme

This is not an isolated case: Temu, TikTok, and Shein share the same tax advisor and fiscal optimization strategy. The three CEOs – Colin Huang (Temu), Zhang Yiming (TikTok), and Xu Yangtian (Shein) – have managed their finances from the same Cayman Islands headquarters.

PDD Holdings’ financial report clearly confirms this:

The Cayman Islands do not currently tax individuals or businesses on profits, income, or earnings.

It’s a straightforward process: Temu sells products of typically obscure Chinese companies, some of which don’t comply with European standards. Western consumers purchase the items, attracted by their cheap prices, and the revenues are funneled into tax havens beyond taxation.

Who ppays the true cost?

As giants such as Temu prosper, European businesses that respect the rules and pay taxes are hammered by unfair competition. Commercial and fiscal dumping robs respectable producers of income and erodes the internal market. This system also affects the environment and society very deeply, considering the disposable character of some of these products, which are hard to eliminate.

Temu is just the latest component of a well-oiled machine that dispatches huge riches to tax havens. And in the end, local consumers, mom-and-pop shops, and the entire economic system ultimately pay the price.

Condividi su Whatsapp Condividi su Linkedin