At first I was presently surprised but after a while I started to wonder. Knowing that the cheapest AVR device costs about $3-$5 I started to investigate how they could build a complete board with MPU for $5 including shipping. It turns out the Chinese have CLONED the Atmel AVR processor with an instruction set compatible creation of their own. It runs most AVR code unaltered save for the fact that some of the peripherals are slightly less capable and the device used in the board only has 1K RAM and 8K flash.
Still it's a very nice entry level board for simple systems. I estimate that you can fit a program of about 1000 lines of C code into the 8K flash, which is sufficient for a lot of projects.