I think we are seeing here a process that will go on steadily for a number of years, as Chinese costs slowly rise towards those in the developed world.
I'm not convinced that world manufacturing can in fact shift to some other third world country, simply because China is so big, and its own domestic demand has been rising at a similar rate to its exports . IndoChina is a drop in the bucket compared to China, and I'm a little sceptical about India, because it is not actually a dirt poor country (though it has many desperately poor people) and therefore labour costs are unlikely to be dramatically lower - in fact in recent years some manufacturing has apparently shifted from India to China... Not to mention the fact that China's infrastructure is now better than India's
And as more of China's production is absorbed by the domestic market , sooner or later some production is going to have to resume in the West as the cost gap closes . Where exactly we are going to find the people to work in these factories is an interesting question, although there are some parts of Europe where unemployment is still high.
At the moment prices of British outline aren't high enough seriously to inhibit demand , and I think we still have some way to go before that begins to happen. But you can get to a situation where a product is just too expensive for the market to bear and demand falls away. I think that is what has happened in Germany - it doesn't seem to be the case that German manufacturers have lost major market share to cheap Chinese competitors , what seems to have driven the disaster overtaking the traditional manufacturers is a collapse in total demand, not loss of market share. I do suspect quite strongly that the root cause of it is that the product is just too expensive for the market to bear : I don't believe 30% or 50% of Geman modellers have recently vanished
There are only 2 ways round that - either you try to make an expensive product artificially cheap by using cheap labour , or you come up with an affordable product (diecast metal wasn't a cheap approach to start with , and what current metal prices must be doing to costs can't be good). Running two versions of every product , in 2 and 3 rail, with 2 digital systems to cover, can't help either - there must be diseconomies of scale all though the chain from design to the model shop shelf (where twice as many product items must be stocked). This sort of thing did for Meccano (Hornby Dublo) a long time ago
There is no way you can make a Porsche an affordable mass market car by trying to slash the wages in Bavaria by 20% - it's not real world stuff , hence it's not clear where Marklin go from here - the news from Hornby signals that trying to relocate production to China might only be a temporary fix,
But if the cost of RTR is going to rise inexorably at 8% per annum from here on in, then at some point , perhaps in a decade's time , the price even of Hornby and Bachmann will begin to inhibit demand.
And I have a very strong suspicion that things like "museum quality" models and widespread DCC Sound are gold plate and bells and whistles that we can't actually afford in the long term. Not if we are to have "affordable" RTR (to borrow a jargon word from the housing market)