If China decides to start making fake blocks, they don't suddenly get the ability to steal Bitcoin, nor do they get the ability to deny Bitcoin transactions for others. Everyone else will immediately notice that some (or even most) miners are dishonest and ignore them.
Right, and I'm telling you that the novel concept in Bitcoin is solving the Byzantine Generals Problem.
If China decides to start making fake blocks, they don't suddenly get the ability to steal Bitcoin, nor do they get the ability to deny Bitcoin transactions for others. Everyone else will immediately notice that some (or even most) miners are dishonest and ignore them.