Chinese factories are known for running two types of shifts: day shifts to make the product the manufacturer requested, and a night shift to make counterfeits of it for local sale.
Aside from those operations, the there is a class of manufacturer in China dedicated to duplicates. They watch the market for anything exciting, and immediately duplicate it as closely as possible using generic hardware and free or pirated software.
IOW, illegal copies can hit the streets in literally days after the introduction of a product. They are sold widely in markets, so brazenly that attempts to shut them down are confronted with protests.
For electronics, I'd moderate that to SOME Chinese factories... Bigger, better ones like Flextronics, Compal, Foxconn, Vtech, and others are heavily controlled and very much on the up-and-up.
Most of the clones you see in cell phones and other electronics don't roll out from the original factory, but from second tier producers who simply buy the original and reverse engineer it for the domestic gray market.
Now, in the clothing/textile industries the second shift is MUCH more prevalent. But it's justified as "overproduction to cover defects in handling/final inspection" because the determination of what is 'good' or 'bad' is much more subjective (how tight of a stitch is tight enough?)