Overwhelmingly majority of dev in Shanghai (or China in general) are still native Chinese. "Easier to get around with very bad Chinese" isn't a factor, at all. Not even rounding error.

China is better than Japan in software development simply because they pay (much) better, which causes more people (esp. more "smart" people) to pursue this career for the money.

And the reason why Japan doesn't pay software dev as well is in the article.