They are competing in the high end in the commercial CNC market, but not every subsystem is domestic.
Keep in mind that Chinese companies can probably get something at the same performance level (or close to that) of Germans and Japanese because those foreign companies move slower (so are not necessarily using the latest subsystems available), but that doesn't mean all the subsystems it uses are at globally leading levels.
So, if you can get the Chinese subsystems (critical ones) to globally leading levels, then it can have higher quality CNC machines than Germans and Japanese.
I think I talked about this before, Americans and Brits apparently have access to certain CNC machines that are not available in commercial market. They are probably not commercially viable, but are just used for defense sector. Building smaller batch (with no cost control to think about) allowed them to use latest tech. But China can do this at much larger scale once it has access to the same high quality supply chain. And it can just destroy the competition in commercial market.