The Chinese economy since the late 70's has been based not on profit, but upon keeping their people employed. To do this they determined to sell products cheaper than anyone else. Their economic model was motivated not by capitalism, but by politics. Their prime concern was keeping the people molified (no or low unemployment) and keeping their high level government jobs and the power that goes with it.
They now are realizing that keeping people employed at a loss cannot be sustained. They also realilze that their own non profitable companies will not be able to pay back the loans they have received from their government over the years. They also know that the U.S., for instance, will never be able to pay back the loans we have received from the Chinese government banks. They have recently switched their strategy to one of cornering the gold and precious metals market and expect to drive up the price of gold and precious metals to unheard of levels and save their butts.
Within the next 5 years you will see a either a collapse of their economy or a huge transfer of wealth from other countries to China based on the value of gold and precious metals. But you will not see communists successfully running any business.