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...and...
There's another element of Chinese culture you're missing and it is that of "miànzi" (面子) or "face" as in our version of the phrase "saving face", or figuratively "reputation". The sellers do care about their reputation, but there are different groups they care about and groups they may not. You're likely a western end user retail customer. Most probably don't care about you. They might care about their reputation with their western reseller customers though.
The examples of poison drywall or adulterated formula are very bad by both Chinese and Western standards, but for slightly different reasons. The western view it as bad because it harmed the end consumers. The Chinese view would be a loss of face of the seller for being such a public and shameless scam without integrity or honor, a huge loss of face.
You're close to understanding, but you're still missing it. Again, you're judging this by western standards. Now, I'm western, and I like the western standards, but I also understand that their culture doesn't have to conform to ours for it to be "right". There is no objectively right way to do this. We're all different humans figuring different systems. I certainly have my preference for the western style, but that doesn't make what the Chinese have been doing for hundreds (3000 thousand, if you ask the Chinese) of years they've been doing less "right".
That's a very recent addition to western culture. Lots of toys even during my lifetime were dangerous. Two generations back, in the USA we had toys like this which heated up to 260 °C (500 °F):
Which caused serious burns and even some deaths for the children playing with them.
In the 1950s this was a toy:
You're bringing your perspective of individualism which is very much a Western idea. Other cultures don't come from that perspective and arrive and different conclusions. I can tell you, we'll see more of this press up on our western culture as trump continues to flounder our dominance and China continues to rise.