Sure, you can self host a non-frontier OSS model yourself; including Deepseek. And no doubt some people will pay one of the companies I mentioned to rent the infrastructure to do exactly that. Much of the rest of the world will be paying directly for direct access to the frontier models.
As for the legal/compliance stuff, I recommend you don't take any big decisions on that front without consulting lawyers. My understanding of that is that most serious companies in the EU have to take these topics pretty seriously. I'm sure in the US, hosting all your data and secrets in Chinese data centers isn't a whole lot less controversial.
The Chinese could of course choose try to match the current levels of investment Google, OpenAI, Anthropic, etc. are putting into local infrastructure. But as far as I know they aren't and there are probably a few political blockers for that.
Without infrastructure, their role is being a niche player in these markets. It doesn't really matter how good they are if they can't scale to most of the market.