In a nutshell and super simplified
1) Poor practical mechanisms in place to address/enforce intellectual property rights. Without IP, no benefits from innovation, no urge to innovate, no investments in innovation - alternative, replicas. Panerai153's comments are very true. In a country where economic growth and social stability is the main objective, the idea of IP just gets relegated to the bottom of the priorities list
2) China's national 'Medium and Long Term Plan for Science & Tech development' plan. In it, they detail a concept called "indigenous innovation" which effectively encourages copying others
3) Enormous existing watch manufacturing industry. Rep makers get their parts from these legit industry who have achieved economies of scale
4) Deep cultural roots that see replicas as a-ok
5) Exploding consumerist middle class who see luxury items as status symbols -> drives up domestic demand
6) Often ignored or not realised, but many Chinese manufacturers make replicas as a way of gaining valuable design and manufacturing skills to which they later use to make legit products
7) Already well established replica industry that contributes much to the economy. The state is reluctant to stop this (other than some token demonstrations such as driving a steam roller over some 21J stuff to appease the West)
Of course it's enormous manufacturing engine, low wages etc etc. But i see those 7 points I mentioned as what makes it distinct from other manufacturing powerhouses like India or the US.
Oh and on the topic of the US, not many people know this, but the United States had started out as a country employing very similar strategies to what China is doing now. The 18th century US govt supported Americans trying to replicate European books, machinery and techniques from the British textiles industry and their copyright laws at the time didn't really grant much protection to any one other than Americans