I do some manufacturing and prototyping locally in the EU. It's pretty awesome due to short turnover times if anything goes wrong. Also, when a subcontractor goofs up, he's there to solve any issues. You can meet real people, discuss details with them, negotiate the prices...
It's not about cost only - when manufacturing locally, you are reducing the risk of failure, speeding up the delivery/turnover, and are able to react faster if something goes wrong - taking the project to a different manufacturer at a last resort. With China - good luck
I think it boils down to how much do you want to engage in all that. From what I've experienced, you need several things:
- be a one-man-call-center. You need to find the companies in your area (city, country, neighboring countries), make a list of the interesting ones, call them, get price quotation. Use phone. Email doesn't work so well for a first contact.
- plan the production pipeline. Decide which company makes which part of the job. Do a quality check up on parts that go from one firm to the other.
- stick to your favourite subcontractors. Being loyal will get you special treatment.
- be professional. Respect the time of the subcontractor. Give them everything they need to make a price estimate, to plan the manufacturing process, ask them for specifications, research the manufacturing and tooling processes so you can agree on details.
You can make local manufacturing work and be cost effective. Just don't expect this to be a pushbutton experience. You have to invest a lot of time into it.
If you're well prepared, and know what you're talking about, you might be in for a nice surprise, especially with the older engineers. A lot of those local firms have to work with sh*tty material and sh*tty people doing work that trickles down to them from corporations, where no one gives a sh*t about the product, the cost, and the outcome, as long as they keep their @ss guard and stay within their Powerpoint budget plans. You and your little project are a nice change from the everyday reality.
edit:
Really, I think the hype about manufacturing cheap stuff in China has quite a lot of marketing to it.
Add the transit times, the import tax, the risk associated with production... It's all nice and fun until something unexpected happens.
Hell's gonna freeze over if I'm gonna rely on any company in China to make my stuff.