Good summary.  When I first started in China, this was also the deal but the laws and processes for forming and managing these entities was uneven.  One positive change is that the rules on these entities have become much more clear.  I wouldn't say you are at the "mercy of the Chinese" as you put it because in any country you operate a business, you submit yourself to the country's rules.  For now, for many types of companies, the rules are clear enough to operate effectively.  Getting your profits out of China is another story.  I encourage many foreigners wanting to make money in China to be sure they understand that much of their gains will stay in China.  If you're comfortable with that, ok.  If not, think hard.