What if everything just worked?

The subway was a little delayed the other day, since the escalator in one of the stations had broken down (I think, I came too late to hear the reason). The inconvenience was minor, but since you do not expect it to happen in well-oiled Japan, you are surprised.
The other month, when I was in China, I was astounded at how well everything worked. Now, this is deeply unfair: In Japan, things are supposed to just work, and an interruption is an exception. There is no reason it should be different in China, yet I was expecting it to be. Of course, in the communist days, it may have been, and during the cultural revolution, it really was an exception that things worked.
This is the first battle when China wants to market itself in the world: Show off the infrastructure. Demonstrate that everything works. It is what the olympics in 2008 is all about - just as the Tokyo olympics in 1964. After 1964, the world started taking the japanese industry seriously. I am old enough to remember my parents complaining about "japanese junk"; my children will remember me complaining about Chinese junk. And I will not be astounded to see quality circles in China within the next few years. Nor to hear my grandchildren praise their quality chinese gewgaws.
If manufacturing in China continues to be as cheap, and the quality goes up to a reasonable level, what will happen to the rest of the world? Nobody pays for excessive quality, it just has to be good enough. But if good enough is cheaper than you can ever make it, how do you add value?