Hm yeah that's pretty good but I don't see the part where China made money.
All they did was discredit the chain and they were willing to actually pay and lose many millions of dollars millions to accomplish their goal.

• China offers tax incentive.
• China raids every warehouse.
• China reorgs the chain.

The funny part about this scenario is that the actual attack on Bitcoin ends up being the cheapest bullet point by exponential margins. The tax incentives and the raids and the employed force are way more expensive than the actual reorganization. And while they are doing this they keep it all completely secret? And who did they steal from and why does anyone care about such a small 0.5 BTC theft?

This entire plan hinges on the assumption that Bitcoin is a threat to China. Which it is not as Bitcoin is actually a net asset to China so they lose even more money attacking it. My final thought on this is that a double-spend can't be "leaked". It doesn't happen in secret; every node can see that the "real" blocks were orphaned and new "fake" ones put in their place. It's a blatantly public ordeal.

everyone is worried that their funds are next.

Are you implying that Bitcoin is being stolen here?
Because it's actually the exact opposite.
Nobody has lost any Bitcoin.
The attacker spent their BTC twice.

See this is why I demanded everyone answer the questions.
Because simply the act of trying to answer them is a learning experience.
The relevant question here being what was stolen and how much.
It is not possible to steal Bitcoin with Bitcoin.
Nobody trades BTC for BTC.