The concept is that after winning the contract (sometimes at a price below their own costs, in order to beat competing manufacturers), the Chinese manufacturer increases their profit margin by "optimizing" the product design - using cheaper components or omitting parts without the knowledge of the buyer, until the products are rejected.
Here's an article I found from a random search on "Quality Fade" [1]. For a counter-viewpoint, the China Law Blog [2] argues it isn't Quality Fade if customers still buy the products. It was written in response to a recall of 23,000 Chinese-made cars in Australia after they were found to have asbestos in their engine gaskets. Great Wall Motor had argued that "their own in-house testing [had] concluded that the asbestos was not a danger to human bodies" [3].
[1] https://sourcingjournal.com/topics/sourcing/apparel-producti...
[2] https://www.chinalawblog.com/2014/03/chinas-quality-fade-is-...
[3] https://blogs.wsj.com/chinarealtime/2012/08/17/chinese-asbes...
The baby formula example that a sibling poster mentioned is another. Where I live the supermarkets have had to limit customers to 1-2 tins of formula each because people were buying trolleys full of it to ship to China, where middle-class Chinese buy it because they can't trust locally sold formula to be safe for their babies.
The argument in [2] that if customers still buy products then everything is fine, when in fact both the immediate client and the end customer are being defrauded, just underscores the mindset behind the problem. Any company (local or foreign) doing serious fabrication in a country like China needs their own comprehensive QC system in place to oversee the entire build process.
I applaud the poster for stating that the veracity of his memory is debatable instead of certain. I wish people would do it more often.
Now, Western companies are no saints (e. g. VW Diesel scandal). But a better system of checks and controls keeps them accountable.