The fact that the iPhone hasn't been cloned in China doesn't mean intellectual theft doesn't occur. Given so much lower hanging fruit to clone, why bother cloning iPhone?
And why exactly would manufacturing jobs go to India? Is there some preexisting manufacturing industry I'm not aware of?
Nope, not pre-existing, but emerging. There are a number of reports on the topic, Wiki references one by PwC (1).
There's also the fact that China appears to be heading for a serious problem with respect to the age of its population. Conversely, India is expected to maintain population growth for at least a couple decades longer than China.
I don't know how the economics work out at the moment, but India does have a couple benefits. A lot more people speak English well (like ten times as many), and it's culturally more accessible to the west. They were under British rule until after World War II, and have in general a long history of closer ties to the western world.
It's also less politically sensitive in the US. Americans have a knee-jerk reaction to China that goes far beyond outsourcing and call center complaints. India is seen as an ally rather than a potential military threat.
From what I've seen, I'm not sure corruption is much less of a problem in China, I think it just manifests differently. Arguably an openly-corrupt society has advantages over a quietly-corrupt one.
And why exactly would manufacturing jobs go to India? Is there some preexisting manufacturing industry I'm not aware of?