Don't think of it as a wasteful alternative to a factory in China. Think of it as the high-end-anchor portion of the marketing engine for high-quality knives, most of which will inevitably be made by that factory in China.
The first rule of selling knives is: You have to convince people not to make do with the knives they already have. This person is performing that service not just for himself, and not just for his own customers, but indirectly for all knifemakers in the world and their customers.
There are always going to be a handful of folks whose tastes are so particular, or whose fashion is so keen, or who are sufficiently friendly with the owner of the local forge, that they insist on buying knives that are hand-made by local artisans that they've actually met. But all of those customers will show their knives to other people, and praise their awesome qualities. (Some of them will buy the knives to show them to other people.) Even more people, like me, will read about the knives in the media. And most of the people who hear about the awesome-quality knives won't be able to afford the local artisan. So they'll go shopping for not-quite-so-artisinal but still-kinda-awesome knives, and they'll find some at the local upscale kitchen store, perhaps with tasteful German names and a nearly invisible "made in China" sticker on the back. ;)
(Others of us will go to the restaurant supply store because we are "knowledgeable insiders" who hunt for "bargains", and will find somewhat cheaper high-quality knives with the "made in China" sticker on the front. And yet those probably have a decent profit margin, too. My lesson from briefly traveling in China and listening to my Chinese friends laugh at my hilarious bargaining skills is: I have no idea how big the margins are on the stuff I buy in the US.)
Sad as it is to recognize that so much of a Chinese factory's business – not to mention my own tastes – is driven by the convection caused by the movement of rich people who are rushing upscale to demonstrate their distinctive taste, that is the engine by which a lot of consumer marketing works, and I suspect that the Chinese manufacturers themselves know the nature of that game better than anyone.