The origin of China being seen as "the manufactory of the world" can largely be traced to the years immediately following Mao Zedong's death in 1976, and the subsequent helming of the Communist Party by Deng Xiaoping, beginning with the National Committee's chairmanship in 1978. Deng had recently visited Singapore (as well as Bangkok and Malaysia) and had been particularly impressed by Singaporean economic development under its then-Prime Minister Lee Kuan Yew. To a significant extent this was an eye-opening moment for Deng, who would proceed to not only send thousands of Chinese citizens to Singapore and other countries to learn from their unique solutions to economic challenges, but would ultimately heed Lee's urging for Deng to basically "chill out on the whole exporting Communism schtick."
Round about this same period, by what seems to have been little more than fortuitous timing, several of the major Western powers including the US' Reagan administration and the Thatcher government of the UK began in the early 80s moving their respective economies away from industrial production and toward a service-based economy. This stemmed to at least some degree in both governments from the theory that diminishing the economic importance of industrial jobs would break the power of the trade unions that had often been adamant opponents of the Tories/Republicans. The push toward a more globalized and open trade system was also coming into vogue in the early 80s, which posited that lowered tarriffs and increased foreign trade would - ultimately - benefit everyone.
Into this increasingly globalized and post-industrial West, who should appear and begin plugging back into the global economy but a China no longer under the rigid ideology of Maoism, but instead slowly, carefully feeling its way in to limited markets production and private ownership. This process way largely laid out in Deng's published program for reform called the 改革开放, meaning "Reforms and Opening Up" policies. China would undergo a series of "Four Modernizations": Agriculture, military, science and technology, and (critically) industry and economy. Deng justified this sea-change in CCP policy - which just a few short years ago would have been absolute anathema to the spirit of the Cultural Revolution - with the explanation that "Socialism does not mean shared poverty. 'It doesn't matter if a cat is black or white, a long as it catches mice.'" In other words, China needed to pursue its own growth and development whether that followed a strict ideological interpretation of Leninism/Maoism or adopted a somewhat more... loose approach to the concept of the Proletariat Revolution. He further said:
Planning and market forces are not the essential difference between socialism and capitalism. A planned economy is not the definition of socialism, because there is planning under capitalism; the market economy happens under socialism, too. Planning and market forces are both ways of controlling economic activity.
Such ideas stood in stark contrast to Maoist ideologues within the party like then-Chairman of the Central Committee, Hua Goufeng, but Deng was insistent - and far more importantly, he held actual power over the nation, and had the backing (and likely had simply implemented the plans of) other high-ranking CCP members like then-Premier Zhou Enlai, who had backed the Four Modernizations more than a year prior to Deng's rollout of the policy.
Private investment in factories and industries was allowed for the first time in the PRC from Taiwanese and Hong Kongnese business on a limited basis under joint-venture operations, as well as a relaxation of PRC citizens housing registration and enforcement of the hukou system... allowing many more workers to move with a greatly expanded degree of freedom away from their assigned places of residence. This, of course, allowed people to go where the jobs were and follow the wages, whereas before they'd been largely confined to waiting for top-down government mandated job assignments. The bottom line of all this was that there was rather suddenly and out of the blue a labor pool of more than a billion competent, educated, reliable labor that had until just recently been so deeply mired in Mao-mandated, state directed poverty that they'd work their fingers off for circus peanuts, so far as Western manufacturing companies were concerned.
Just ahead to the early 1990s, and American corporations and investors had begun preaching the benefits of outsourcing. Corporations, seeing that such a move could massively cut their overhead, quickly jumped aboard and in short order began to portray anyone raising a fuss as essentially out-of-touch Luddites who needed to get with the times. Factory jobs in the West would go where labor was abundant and dirt-cheap, ostensibly to be replaced by better service-secotor jobs... while countries on the receiving end of that situation (Japan in the 80s and early 90s, only to be absolutely eclipsed by China as the "Japanese Miracle" wore off and the Middle Kingdom continued to surge ahead thanks to its seemingly limitless labor supply) would be able to utilize that influx of foreign capital to reinvest into their own economies and pursue further growth. And thus it was that every t-shirt at Walmart and every Happy Meal toy at McDonalds came to be emblazoned with the immortal words:
#Made In China™
Bo, Zhiyue (2007). China's Elite Politics: Political Transition and Power Balancing.
Brook, Daniel (2005). Modern revolution: social change and cultural continuity in Czechoslovakia and China.
Davies, K. (2013), “China Investment Policy: An Update”, OECD Working Papers on International Investment
Gittings, John (2005). The Changing Face of China: From Mao to Market.