First, let’s look at the 24 hour check the Xbox One has to run to ensure an internet connection. Servers for Microsoft in China? Those would be imaginary. In other words, there won’t be any. Sony doesn’t do this with PS4, so there goes point one to Sony. Perhaps this was something they took into account.
What other point could Microsoft have floundered on? That one is easy enough to guess. Price would be the next culprit to hit the Chinese people hard. Just converting the price of the Xbox One here to the Chinese Yuan makes it approximately 3,048 CNY. The price of the PS4 is 2,437 CNY. This brings us to a difference of 611 CNY. I know which would I would buy if I was pressed for cash but still wanted at least one of the latest and greatest generation of consoles. Then take into account that these are straight conversion rates for legitimate items. Since consoles are illegal, I would imagine the cost is going to be significantly higher.
It remains to be seen what Microsoft will do in this situation.