LONDON (Reuters) - Fast fashion retailer Shein said it would invest 250 million euros ($271 million) over five years in the UK and Europe as the company battles criticism of its model based around flying cheap clothes and accessories from factories in China direct to shoppers worldwide.

Shein, which is preparing for a possible London listing, already sources some clothes from factories in Turkey, although the vast majority of its products are made by around 5,400 suppliers mainly in Guangzhou, China.

Textile associations and politicians in Europe have accused Shein of eroding local industries by flooding the market with garments at prices domestic factories and retailers cannot compete with, partly thanks to its use of a tax break for parcels worth less than 150 euros entering the European Union. A similar tax break in the UK is for parcels worth less than 135 pounds ($173).

The EU is discussing abolishing the limit as part of a customs reform project proposed by the Commission in May 2023.

Shein said on Tuesday it has earmarked 50 million euros for "potential investments in R&D or pilot Shein production facilities in Europe or the UK," as well as initiatives to help brands and designers from the region reach a bigger market through Shein's marketplace.

Shein, known for its $5 tops and $10 dresses, reportedly recorded sales of about $45 billion in 2023 and was valued at $66 billion in a fundraising round last year.

Talking to Reuters, Shein executive chairman Donald Tang declined to give further details about where the company was looking to start sourcing from.

The company was "keeping options open" he said, but he noted the facilities would most likely be suppliers, as opposed to being owned and operated by Shein.

He said the share of Shein products made in Turkey is currently insignificant compared to China, but is growing fast.

Shein also said it would bring more UK and European artists and designers into its incubator programme.

The announcement comes as the company is having to adapt to new European Union rules partly intended to ensure online platforms do not breach intellectual property law.

China-founded Shein also said it was launching a "circularity fund" with an initial investment of 200 million euros to support start-ups and businesses throughout the region that are developing textile recycling technologies.

"Given Shein's scale and reach ... Shein can become a catalyst for widespread adoption of these solutions across the industry," said Tang.

It is inviting businesses, financial institutions and sovereign wealth funds to co-invest in the fund.

($1 = 0.9234 euros)

($1 = 0.7810 pounds)