Mike,
I have had an engineering office in Shenzhen for the last 15 years. I make most of my tooling there which is in turn used in my manufacturing facility in the USA. The following is based exclusively on my experience. I am sure others have had very different outcomes. You really can't make any blanket statements about the eastern rim....it represents all outcomes.
In a nut shell I advise boots-on-the-ground that you control for any meaningful long term endeavor. The standard deviation on most things is higher there than what you may be accustomed to sourcing product in the USA. That said, with the proper due diligence and local project management that you control (i.e., directly employ) you can source world class product today (much different than even 10 years ago). The challenge is ongoing quality control as it is a very dynamic place.
What Mark said about intellectual property piracy is absolutely true. Noncompetes aren't worth the paper they are written on as enforcement is very difficult.
Big picture wise, a lot of capital is flowing out of China these days due to overcapacity, excess leverage, and slowing growth. There is a lot of system risk right now given the asset bubbles from excess stimulus but if you can avoid the implosion, these same issues may work to your advantage as prices have started to soften for the first time in a long while.
Good luck, be careful and have fun.
