I don't see this happening. We're now seeing Chinese SoCs built from western IP cores (e.g. Allwinner) and soon there will be all-Chinese chips. They don't bother to write any English documentation and they just throw barely-working, uncommented drivers over the wall, never bothering to participate in upstream development at all. (Note that this is only marginally worse than traditional western embedded development, so I'm not really criticizing the Chinese electronics industry.)
I wonder how much of that investment finds its way back into upstream projects. Really - I don't know one way or the other, although I have a suspicion that they don't really 'get' openness and so probably violate the GPL.
Now, for an organization operating at China scale, it's possible that a fork could be sustained (so, the "China Syndrome" becomes the "China Fork"), but it's likely still not an optimal strategy, and for mundane areas there could still be substantial leak-back.
So long as changes aren't distributed "outside the organization" (quotes applied in context of defining "organization" relative to a Communist state in which nominally all property is State property), legal GPL code release requirements aren't triggered. Though you and what nuclear-tipped army plan on enforcing that against Beijing is of course another matter.
I remember the times I had to hack around for days to get some particular piece of hardware to work. That happens less and less, and now most of the stuff I buy just works.
Video cards and capture cards are the big exception for now, they somehow work sometimes, but this is getting better every day, and this news takes us in that direction even more.