Even if nobody in China were on the Internet, Chinese Bitcoin miners could conceivably mine over the telephone. I mean, that's how pure the hashing problem is and how small the amount of information that has to flow back and forth is. (They would need to have an agent in another country who was on the Internet and was willing to relay hex strings between the Internet-connected computer and the person at the other end of the phone call, but the amount of data that would have to be exchanged this way isn't beyond human capabilities by any means.)

I don't think an isolated internet is the solution. That's what North Korea has (to the extent they have internet), and it is a problem in every way. The problem isn't really China, it's there are only a handful of people with the keys to this castle.