Not sure if China is such a turn-off for Game Freak, actually. After all, they were fine with constantly using Chinese mythology for designs for Pokemon. Just because they don't get on too well with China doesn't mean imo it rules it out.
That said, while it's a neat observation I feel the 5th gen starters here are just a coincidence with nothing really obvious tying Oshawott to Hoenn specifically either. Japan ties with the samurai basis, yes, but Hoenn itself... I can't see it. Regardless, if a game happened that was based on China, I very much doubt it'd be gen 6. 7 at the earliest.