It would be usual for an individual to be on China payroll and not be eligible for foreign earned income exclusion.  If you would like to discuss more, please open a new thread on your own.

You should be able to use the W-2 worksheet but make sure you enter China for Foreign Country.  You then need to create a F.1116 for China and enter the gross foreign source income as the amount you enter in the W-2 worksheet will not flow automatically to F.1116 (and not all of the compensation may be foreign source).

China has a very different tax regime than China and IIT provides for various concessions for foreign nationals, which are not applicable under US tax law.  This means you cannot rely on the IIT receipts or return for US tax reporting purposes but will need to obtain full details of the compensation package, including cash and noncash benefits to determine the proper US tax treatments.