Ok, since early 2011, China replaced Japan as the biggest economy in Asia as well as the 2nd in the world.

And the Chinese gaming market is now also the largest on this planet: http://www.newzoo.com/infographics/infographic-the-chinese-games-market/

They have the market, but they still heavily lack in the developing video games department. But this probably will change soon, as Chinese companies are planning to own pretty much everything.

It's just a matter of time before they know how to make the next Pokemon! or Mario! Or Gran Turismo, or Final Fantasy, or yeah... ya know wat i mean :3.

Biggest economy does not mean that they can develop games. Just like in other forms of art/entertainment as movies and novels, it takes a whole lot more than just money to develop such contents. They will first need to build up an environment and culture that stimulates people to have creative ambitions.

China's Slave Simulator 2016

Bruh, Epic Games (Gears of War, Paragon, Infinite Blade, Unreal Engine) and Riot Games (League of Legends) are owned by a Chinese company.

Maybe, but can you tell me actual Chinese developers that make interesting games?
I'm not saying they are non existant, I just want to say that a sudden rich economy will not create genius developers in an instant. Those things need to be built up bit by bit.

They have the Skills... but lack the Creativity and Talent

Lol
The superpolystation
It looks legit

Strongly doubt they can "replace" them.

Maybe we'll see a small studio or two from China, but overall it would take them at least a Gen or two to catch up with Japan.

I think with the success of the Xbox in Gen 7, people forget how Japan used to be like 90% of the industry in every gen prior to that starting in Gen 3 with the NES. That can't exactly be matched overnight, bigger economy or not.

The best chance they would have is if another gaming crash happens which isn't exactly a pipe dream looking at the current budgets for these things.

But to take over, you also need quality top to bottom i.e. dev studios that make hit after hit, and other markets would have to buy into those games much like how the US and EU ate up Japanese IPs once they came to the west via the NES and Sega consoles, and that's something that just can't be predicted.

I believe Sony manufactured PS3's in China too, but we're talking game development here, not 3rd party ownership.

It takes a few decades to develop an industry like that. You can't do it overnight.

There's also the rather large problem of the ministry of culture (yes, it's really called that). It's not clear how much other countries will want to play things that have been massively constrained based on what the Chinese government deems acceptable.