From this and other accounts, it is clear that a lot of the low cost in China is due to that fact that transaction costs (the cost of writing contracts, lawyers, specifications) are reduced by replacing formal contracts by interpersonal relations[0]. So if someone screws you[1], it will hurt their relationship with you and their reputation.

Of course there are other considerations like cheap labour and the ability to rip-off Western IP (though I don't think those goods make it to the West). But these can't explain why China in particular is so dominant in manufacturing.

[0] I'm told that the term "guanxi" has two meanings. First as a generic term for "connection" or "relationship" and second as a proper noun for the way people indirectly bribe government officials. Here only the first meaning would apply since I'm talking about B2B relationships. And since it's a generic term, there is no reason to use the Chinese word.

[1] Or screws you more than is considered fair game.