I don't think China needs any third-party payloads. Even if they only launch Qianfan it should be enough to bring costs down.

The issue is that SpaceX, unlike any space company since some never-realized 1960s hypotheticals, is a flywheel company built around scaling.

They create demand so they can scale manufacturing that they can use to decrease prices that creates more demand... etc. etc.

You can't beat a company doing that by just getting "big enough" unless the scaling company (a) runs out of increased demand or (b) cannot convert increased volume into cheaper economics per unit.

Neither of those seem very plausible.