Cutting Ties With China Is Harder Than Companies Expected

Learning Resources, responding to President Trump’s trade wars, is attempting to shift production out of China but is finding that relocation does not erase Chinese influence: its Dong Phuong factory in Phu Ly, Vietnam, is Chinese-owned and managed and even displays Chinese cultural markers. The example underscores how deeply embedded ownership, management and operational ties to mainland firms can persist when production moves abroad, complicating US companies’ efforts to de‑risk and diversify supply chains.

Analysis

Learning Resources is actively shifting production out of mainland China in response to President Trump’s trade wars, but its experience shows relocation does not eliminate Chinese operational influence: the Dong Phuong factory in Phu Ly, two hours south of Hanoi, is Chinese-owned by a Zhejiang firm, managed almost entirely by Chinese staff and even displays Chinese cultural markers according to vice president for marketing Elana Woldenburg Ruffman. The example demonstrates that ownership, management and cultural ties can persist when manufacturers are moved geographically, meaning that apparent country-of-production changes may not materially alter supply-chain control or influence.

This dynamic matters for investors because tariff avoidance or geographic diversification may provide only partial de‑risking; rules-of-origin, compliance and reputational exposure can remain if decision‑making and ownership stay tied to mainland entities. The provided sentiment signal (score -0.35, mildly negative) and a modest market impact score (0.25) indicate the market should view such announced moves with caution rather than as certainty of reduced China risk.

For corporate outlooks, expect longer timelines and higher implementation complexity for genuine supply‑chain decoupling, plus potential needs for enhanced supplier diligence, contractual remedies and governance changes to achieve substantive independence from mainland operators. Companies that merely shift factory locations without changing ownership or management structures may not realize the full strategic or political benefits investors expect.

Key Decisions for Investors

• Reassess portfolio positions in companies claiming China “de‑risking” by verifying supplier ownership and management rather than assuming geographic moves remove exposure
• Require or look for documented supplier due diligence, contract provisions and governance changes that transfer operational control if investing in firms citing nearshoring as a risk mitigation strategy
• Monitor trade policy developments and emerging‑market governance risks closely and prefer companies that demonstrate demonstrable control over manufacturing decisions rather than only relocated production