Its pretty hard to word this, so bear with me. Nintendo wants to enter the Chinese market LEGALLY, since apparently piracy is rampant. That's the fact. And instead of foolishy trying to eliminate it completely, they are making it cost effective, and legit at the same time. With piracy, quality control is not guranteed. With the Nintendo name on it, its got be good!
Nintendo so far has no intention to bring this to the major territories, so you're right that this wouldn't make much profit here. Consider this an initial investment in a BIG market (Remember China has the world's population; naturally big corporations are anxious to sell their goods to that potential costumer base.)