There is no stable Mutually Assured Destruction Nash equilibrium here, if either of us does this thing it causes dramatic harm to both.
Not regarding that as a worthwhile goal is "mineshaft gap" thinking - a zero-sum mentality entirely ignoring our collective advantage in order to pursue competitive advantage.
It is perfectly feasible to run a Chinese constellation alongside Starlink sharing the same space, orbitally. Very low orbits are self cleaning.
China as a whole is seen differently than the Chinese Communist Party.
That sounds not just expensive but unrealistic. I think it’s easier and more politically acceptable to just cripple their launch capabilities with cyberattacks or direct force. It’s not like the world trusts or likes the CCP, or looks favorably upon their aggression against Hong Kong, Taiwan, Tibet, Bhutan, Japan, the Philippines, Vietnam, etc. And this stakes are too high with orbital pollution
The bully isn't going to learn with this implicit encouragement.
Either you get along or you do not get to be a spacefaring civilization.
- "Launch their satellites for them, at 400km."
No reasonable person would help their adversary build powerful weapons that could immediately be used against them. The point of satellite constellations—Chinese or American, either—is to create undeniable, high-bandwidth communications for armies; to create real-time (as opposed to sporadic) satellite imagery for armies; to create, in short, an overwhelming situational awareness advantage in a conventional war.
- "Give them cash or territory."
We are not giving away countries.
"The most tempting orbits are the ones in upper LEO that permit them to launch fewer satellites."
Higher altitude => wider coverage => fewer satellites
Orbital slots are managed by ITU United Nations International Telecommunication Union who manages availability / congestion. SpaceX reserved substantial % of sub 500 km slots. Hence PRC announching their megacontestallations to reserve 500km+ slots, specifically because there isn't enough room in sub 500km for another mega constellation so they're grabbing next best ones.
PRC megaconstellation is targetting 500km+, they're not going to put up 10,000s of mega constellation without economic reusable, hence many options under development. They're choosing orbits based on assumed reusables not current launch costs / vehicles, which btw LM5 is $3000/kg, or ballpark enough to F9/kg for disposable megaconstellation launches despite cost. But bottleneck is resusable vehicles can sustain the required tempo for megaconstellation that disposable can't.
Put 100k boost-phase interceptors into LEO. Permit them a fixed quota of launches per year, shoot down the rest. Pax Americana.
We stand to lose a lot more from a space war, right now, than anyone else. We (US/west) hold the lion's share of space commerce and orbital launch capacity. "Earth orbit is free and open for everyone" is more than Star Trek idealism—it's a precedent we've set that benefits us, especially.
The world is already dangerously unstable and here we are discussing new ideas on how to make it more so.
Stopping China's (highly strategic, military) satellite constellations isn't a "small amount of diplomacy". It's an impossibility.
(It's even their declared planning that deliberate Kessler cascades are on the table [0]—to try to ground this discussion in diplomatic reality).
[0] https://www.scmp.com/news/china/science/article/3178939/chin... ("China military must be able to destroy Elon Musk’s Starlink satellites if they threaten national security: scientists")