I'm not saying there is no market for 9-seat abreast wide body airliner. There is but it is kind of crowded. But first, lets set the fuselage and cabin width straight.
Airliner Fuselage Width Cabin Width First Flight
Boeing 767 5.03m 4.72m 1981
Airbus A330 5.64m 5.28m 1992 (A330neo first flight in around 2017)
Boeing 787 5.76m 5.49m 2009
Comac C929 5.92m 5.61m
Airbus A350 5.96m 5.61m 2013
The 8 seat abreast market is not disappearing, Boeing actually plans "New Midsize Airplane"(767 successor, size not definite yet, but should be smaller than 787 for an 7/8 seat abreast economy configuration) to address this market, but the 737MAX debacle, 777X delay and resulting financial struggle is holding them back. And for Airbus, A330 is the 8 seat option, and A350 the 9-seat option.
Airbus/Boeing's timing of new aircraft depends on the time-frame of previous aircraft a lot, so sometimes there is an opening for new player to exploit. Boeing introduced 777 when a lot of old tri-engine jets (DC-10 and L1011) started to be phased out. A350 is positioned as a successor to A340, which started to be decommissioned in early 2010s. Just like 787, with improved fuel economy which enables an exceptional long range for a relatively small aircraft, makes a lot of point-to-point direct route with not that much big traffic possible, is the crucial reason for its success. I believe a smaller C929 (about 5.4m fuselage width) with good range has much bigger market potential than its current configuration. Current 929 should be the next COMAC wide body airliner(C939).
Of course "military utility shouldn’t dictate commercial design, as commercial airliner manufacturers." But it is obvious that some airliners are more suitable for usage as AWACS/tanker platform than others. Boeing does not offer 777 based AWACS/tanker, not because they cannot, but because it doesn't make much sense.
You are right, to airlines, economics is vital and "they care about passenger per fuel miles." But they have to fill their seats first, for 2 airplanes with similar per seat fuel consumption, they usually prefer the smaller one, as they can easily fill up a smaller aircraft. Airlines chose A350 because it is a clean-sheet design with much improved fuel economy, not like A330neo, which is just an old plane with relatively new engines (adapted from engine used in 787, not even newly developed).
You're overwhelmingly focused on cabin width, while disregarding all the other factors at play.
For instance, whilst having a wider cabin than the A330neo and 787, the C929 is slated to have a MTOW of ~248 tons - Which is roughly in the same category as the 787 (~228 to ~254 tons) and the A330neo (~252 tons). Granted, the A330neo is based on the older A330ceo from the early-1990s while the 787 is from the mid-2000s, but the point still stands.
Meanwhile, the MTOWs of the A350 and 777X are ~283-300+ tons and ~350-360 tons, respectively. Both of them certainly aren't in the same category as the 787 and A330neo, let alone the C929. In fact, I certainly failed to see how the C929 is equivalent to the A350, let alone the 777 as you are alleging to be the case. This fact also applies with any potential military applications with the C929.
Speaking of military applications - Airbus just launched the A330 MRTT+ last year, which is based on the A330-800. The A330 MRTT+ is meant as a successor to the A330 MRTT, which itself is based on the A330-200. And guess where do their MTOWs lie?
Plus, if anything - Reasonably larger aircrafts (but not too large like the A350 and 777X) means greater volume, and hence greater carrying capacity. If the PLAAF wants to base their future large-sized AEW&C, AACP, tanker and VVIP transport on a widebody airliner in the future, the C929 is actually a much better platform than going the other way.
Also, the Boeing MSA is still very much stuck on the drawing boards and meeting room tables than to be a meaningful addition into the discussion.
During the covid era, international flight plummeted, freeing up a lot of wide body aircrafts. That's why they are used in a lot of domestic routes. And for some congested airports, wide body airlines are used for short flights, like Japan used to fly 747 in domestic routes. But these are exceptions not the norm. Aircraft manufacturers do not actually target these small markets.
Certainly not, not even in East Asian countries with massive populations, large demand and limited airport slots, where widebody aircrafts frequently being used for domestic flights between major population centers and regional urban hubs have always been the case before the COVID-19 pandemic.
It is precisely because China does have such conditions that the C929 is envisioned with wider cabin and a 9-abreast economy seating design. And given how things are going on with the geopolitical front - China would have a greater demand for such airliners from domestic airlines first-and-foremost than foreign airlines.
