It's the same business model as Wish or AliExpress. They are just marketing heavily to try and be even better than them, like Wish did when it was new and now it seems to have disappeared (but still exists). The way they make money is volume and low margins. If you sell a LOT of items for pennies' worth of profit that's still better than selling a few items for a few pounds worth of profit.
But also there is not "the Temu factory" this is not one company, it's an online marketplace.
"Made in China" is a misnomer, as people have said, made in China is a lot of things, including high end brands like Apple. But there is a difference between the products made for large companies that just happen to have their factory situated in China (even if it is for cost etc), and these tiny individual no-name factories churning out products with no quality control, safety standards etc just for the cheapest possible price for it to look right enough that you won't return it instantly.
If you're buying from a company that is legitimately placing itself in the market, building a reputation for high quality and ahering to standards etc then you know that the product won't be a load of absolute rubbish (you have the right to return, if it is) and you know that it won't harm you if used in the intended way.
If your business model is just to make the cheapest possible shit thing and if you get challenged you can just disappear and instantly rebrand, then you don't care about any of that stuff. So you get toxic plastics, dyes, chemicals etc being used as they are cheaper than the stuff that is certified as safe or food grade. You get electronics that aren't properly earthed so can carry a risk of electric shock, or which will burn out quickly and stop working, or which don't have safety features so they can overheat and cause a fire hazard. And yes sweatshops and unethical stuff like that (though, as said, these things also happen for factories used by "trustworthy" brands).
There probably are safe things to buy from places like that but in general, people should be a lot more wary than they generally are. This goes for the same no-brand anonymous cheap stuff for sale on Amazon etc as well (at about 3x the cost of Temu/Wish/etc)