This is slightly inaccurate.
The "little seafaring the Chinese did" in illegal trade was actually a huge business, and these "pirates" ended up merging with the remnants of the last Ming court, and eventually drove away the Dutch forces settled in Formosa (aka Taiwan). See eg. https://en.wikipedia.org/wiki/Siege_of_Fort_Zeelandia
Even during the Qing dynasty, "pirate" forces in the China coastal seas were huge, often commanding forces up to tens of thousands of men, and hundreds of war ships. The Chinese government in Beijing of course did not do much though, and basically repeatedly and actively sabotaged the sea trade in order to suppress the "pirates". (see eg. https://en.wikipedia.org/wiki/Zheng_Yi_Sao )
If the Chinese governments at the time did not see these "pirates" as an adversary but instead figured out profit sharing schemes like the European powers did with the "East India Companies", it's hard to say whether the Europeans would have dominated the Far East trade so easily.