I am no economist (I am pretty sure this a well studied and documented field), but as some one who has lived in both developed and developing countries, I imagine it is because people from third-world country accept much a lower standard of living than a person in the first-world country. This is pretty much reflected in every aspect of life to the littlest detail. Everything from quality and size of accomodation, to the vehicle you drive, the quality of food, roads, toilets, water, etc. A shop or an office or home, might be more shabby in a poor country than in a rich country. Even if functionally they may be the same, a higher level of expectation is there in a rich country.

All this costs money, and it all adds up. Once the average Chinese citizen demands to have the same standard of living as his/her counterpart in the west, the price advantage will disappear.