What does it mean "remotely competitive combustion engines"?
China has been building ICEs for decades, that's for sure, and if they had not been anywhere to remotely competitive people wouldn't be buying them and therefore OEMs wouldn't be producing them, no? But they do. And still do.
The last notable example is [1] twin turbo-charged 4.0 V8 from GWM reportedly delivering 450kW and 800Nm of torque. You can't build such an engine without the very deep expertise in materials, mechanics, chemistry, and everything it takes to manufacture such a beast.
GWM builds traditional gasoline and diesel engines too but then you have other similar OEMs like Geely, BYD, MG, Chery which have been doing the same.
And then you find out that China builds their own diesel engines too but for heavy machinery like trucks, vessels, tractors, ... [2]
So, I see no evidence that they are not capable in manufacturing ICEs. Quite the contrary. Reason why we don't see it in European or American markets, or have not so far, is of a different kind and not competitiveness.
[1] https://www.motor1.com/news/758255/china-twin-turbo-v8-engin...