> Turns out the Chinese either had worse quality control or poorer skill, but they simply couldn't produce at the same level.

China can, actually.

We've had molds made for the smallworks.com products in both China and locally (Austin, TX)

These molds, due to the desire to interface with LEGO products, have to produce products that are both "higly cosmetic" as well as dealing with the extreme tolerances of LEGO's system.

It's about 1/3 the price to make the molds in China. Due to shipping and import duties, it's about the same price to run production in the US as in China.