Can someone tell me what is exactly wrong with the Chinese arduino clones?
They don't contribute back to the community. The community is a pretty fundamental component of open-source designs, and includes both the official Arduino team and the extended user/development community.
(I should say that the examples here are made-up; I have no idea who does and doesn't kick back to the Original Team, for instance.)
So if Sparkfun makes their "pro" or Adafruit makes their BoArduino Arduino clones and sends some royalties back to the Arduino team, they've done spectacularly well. An "enhanced" product that offers additional features (or less features, as the case may be), complementing the official product line. Plus cheaper. Plus additional support from their development teams. Plus additional distribution power (Sparkfun at Microcenter!)
Now, if I make a "Freeduino" clone, or Seeed does their Seeeduino, and start selling it without sending any royalties to the original team, then we've done "pretty well." There's a differentiated product with some features that some people will find useful, and participation in the community, and things learned during the publication, and new channels.
And if someone takes the reference design, changes the name to XYZDuino on the silkscreen, and starts selling it at a lower price as "XYZDuino Arduino-compatible" on eBay, well... that's about the the minimum required to be "behaving." They haven't contributed very much, other than a lower price (which may help some people buy them) and maybe an sales channel that prevented Arduino from being unavailable in a particular country/etc.
------- Here is the line. -------- (IMNSHO) --------
On the wrong side of the line are clone vendors who simply take the reference design as-is (or modify it to be MORE official-looking), manufacture it and sell it as an Arduino. They haven't contributed anything, they don't participate, and they're lying about the origin. Still, nice and cheap.
And then some vendors will do it badly, shipping product that doesn't work right, requires additional support by the "real" community and/or frustrates would-be users and/or gives the official products a bad reputation.