This is pretty common in my experience, which really sucks because it leads to stereotypes. I know some fantastic Chinese and Indian developers, but far more often than not, I've dealt with charlatans. I think it's just much easier for criminals to get an actual business going and get money flowing in when they're (a) not held to the same legal standards and (b) can hide in complete and utter anonymity due to geographic distance.

I don't know if there's a good way to solve that other than to seek out well-reviewed, established firms, but at that point you'd be spending nearly as much for a US developer. :)