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Jason and Rodney Carr hate to raise their prices. Their Gardena, Calif.-based distributor of curtains and home fabrics, Softline Home Fashions, usually keeps its costs low by sourcing materials overseas: 100% of their raw goods and 80% of their finished products come from China. But recently, China hasn't paid off the way it used to. In the past five months, the Carrs have seen their manufacturing expenses rise 20%.

Dongguan City is the the shoe capital of the world: more footware is made there than anywhere else on the globe. From 2001 to 2007, the value of footware exports from its province of Guangdong doubled from $4.3 billion to $9.2 billion, according to China's state-run news agency. But in the past year, hundreds of factories have left town, driven out by the rapidly rising cost of doing business in China.