HONG KONG/NEW YORK (Reuters) -Fast-fashion giant Shein is stepping up preparations for a London listing after its attempt to float itself in New York faced regulatory hurdles and pushback from U.S. lawmakers, two people with knowledge of the matter said.

The online fashion retailer plans to update China's securities regulator on the change of the initial public offering (IPO) venue and file with the London Stock Exchange (LSE) as soon as this month, said one of them.

Shein, which according to one of the sources was valued at $66 billion in a fundraising last year, started engaging with the London-based teams of its financial and legal advisors to explore a listing on the LSE early this year, said the source and a separate person familiar with the matter.

The China-founded fashion company has also approached London-based fund managers for introductory meetings ahead of the planned float, said another source with direct knowledge of the matter.

Shein and the LSE declined to comment. The China Securities Regulatory Commission (CSRC) did not respond to a request for comment.

Shein confidentially filed for an IPO with the U.S. Securities and Exchange Commission in November, and approached the CSRC to seek Beijing's nod in the same month, sources have said.

The plan for a U.S. IPO is still officially on the table, but the Singapore-based company has been struggling to clear regulatory hurdles both in the U.S. and China, amid lambasts from U.S. lawmakers on alleged labour malpractices and lawsuits from competitors.

The CSRC earlier this year informed Shein that the regulator would not recommend a U.S. IPO due to the company's supply chain issues, said a separate source.

While Shein is now gearing up for a London IPO, it still prefers New York as its listing venue and plans to keep its SEC application alive in case there is a change in the stance of U.S. regulators, said the second source.

It may also pursue a secondary U.S. listing in New York following its London IPO when it deems the U.S. political climate to be more favorable, the second source added.

The company has faced tougher-than-expected scrutiny from U.S. regulators in an election year. In a sign of the fraught nature of the application process, the SEC has yet to advance Shein's IPO filing, said the two sources.

The SEC did not respond to a request for comment.

Shein's plan to update the Chinese regulator on the London IPO would make it subject to Beijing's approval under the new listing rules for Chinese firms going public offshore, said the first source and a separate source.

The IPO, if it materializes, could be one of the largest globally this year, sources have said.

CHINA REGULATORY NOD

For London, it could mark a turnaround after companies such as U.K. chip designer Arm chose to list in New York to chase deeper pools of liquidity. So far this year, there have been just four U.K. IPOs out of more than 30 in Europe. 

Sky News reported in December, citing sources, that Shein's chairman Donald Tang had met executives from the bourse and other stakeholders in the U.K. economy during a visit to London that month.

Shein, known for its $10 tops and $5 biker shorts, has filed with the CSRC which subjects it to Beijing's permission for an offshore listing despite having moved its headquarters from China's Nanjing to Singapore in 2022, highlighting the limits of its efforts to present itself as a global rather than Chinese company.

The group, which sells cheap fashion in more than 150 countries, does not own or operate any manufacturing facilities, relying instead on about 5,400 third-party contract manufacturers, mainly in China. That makes it subject to the CSRC listing rules, Reuters has reported.

The rules are applied on "a substance over form" basis, giving the CSRC discretion on when and how to implement them, sources have said.

Under the new rules, a host of other authorities such as the National Development and Reform Commission, which supervises foreign holdings in local firms, the cybersecurity regulator and others may get involved in approving offshore IPO applications.

The Cyberspace Administration of China (CAC) has also been conducting a procedural cybersecurity review of the company's data handling and sharing practices, mainly about information on its suppliers in China, as part of the IPO clearance process, said a separate source with knowledge of the matter.

The CAC did not respond to a Reuters request for comment.