I remember a conversation I had in the late 1990s with the owner of an Indian textiles company (father of a friend). He said Western companies investing in China were idiotic. He was upset because Chinese mills were selling textiles for cheaper than the raw inputs. His point was that anybody who thinks they can "compete" in such a market is stupid. The Chinese government (buoyed by dumb Western money) can support their producers for longer than any non-Chinese company can stay solvent. That will remain true for the foreseeable future.

The only winning strategy is to use this state of affairs to your advantage, which mostly means exploiting Chinese labour and investments to bolster your position in foreign markets. But trying to compete directly in the Chinese market is just dumb. The government isn't stupid. Long-term they know that they'll need every penny of their consumer market to prevent the financial collapse of their producers. And even if the collapse comes, that makes it all the more important to capture that value.

Better to wait it out until the Chinese market matures. You'll end up no worse than someone who entered prematurely, and probably better off.