The hidden cost of doing business in China is that for a new product with innovative features, it shortens the time before there's a cheap competitor. If they have to tear it down and reverse-engineer it to make a copy, that takes time, but if you've given them all the drawings, it's much easier.
Yes, I've seen it a couple of times with offshoring, once with an Indian company whose boards worked perfectly in our system and looked remarkably similar, and their EPROMS (yes, that old) were identical to an earlier version of ours apart from where they'd used a hex editor to put their name in instead of ours (good incentive to have a short company name). Turns out some years before the company looked to have the Indian company manufacture for them. The other one, more recent from China, was a subsystem in a competing product that was almost identical to ours. The killer there was that while all the mechanical parts had different part numbers on them, the PCB had our part number etched into the copper. The product was made for us in China.