The short answer seems to be: you can't protect yourself, it's a waste of time and money trying, and just keep making your stuff the best it can be for the audience you want. Unless your target audience is in China, don't worry about China until you're Google (and even still, don't worry too much about China). Or at least that seems the best strategy for a startup that's short on time and cash.

Curiously, even Apple wasn't able to make headway in fighting counterfeit products. [1]

"China's government declined to investigate a facility ... that was manufacturing imitation Apple laptops because it threatened local jobs ... A different arm of China's government scrapped plans for a raid on an electronics mall in the Guangdong province because it could have driven away shoppers, the cable says."

[1] http://www.macrumors.com/2011/08/30/apples-anti-counterfeiti...

If you're good enough nobody will take as much care in creating a copy as the you did the original.

It's tricky but the best way is to be a Chinese citizen in the country. This will avoid bribery laws of USA (China is more lax and society there encourages it), Chinese government officials will be supportive (Baidu > Google), assist government in finding anti-government people and more.

I'm curious as to where the line between 'copying' and 'competition' is drawn.

Generally, chinese companies that 'steal ideas' (if you subscribe to such a notion). Release to a chinese market, that you don't (and likely never will) have access to.

So what are you protecting against?

Brands and easy-to-copy stuff mostly: http://www.businessinsider.com/china-fake-stores-2011-8?op=1