I probably agree with the principle behind your comment, but:
* Those incarceration numbers come from the Chinese government and haven't been audited by any third party (a perennial complaint about Chinese prison statistics)
* They don't necessarily capture every form of detention present in China, including forced labor camps, administrative detention, house arrest, and pre-trial holding.
* Speaking of which, Chinese police can (according to HRW) send people to "Reeducation Through Labor" camps for up to three years without trial.
* Something like 650MM Chinese live in rural poverty in the countryside; China also has a concomitantly low crime rate for its population. Another way to say this is that there are effectively two Chinas in a way there aren't two Americas.
* Not all incarceration is intrinsically bad. For instance, a recent survey of Cook County found violent domestic assaults made up a huge component of all offenders. China has rampant, endemic violent domestic abuse issues. If China is incarcerating fewer people in part because it's doing a worse job of protecting helpless people, that's not a great thing either.
* And of course, China imprisons people for political speech; it imprisons defense attorneys (for "obstructing justice") even in nonpolitical cases; it executes more of its citizens and for a much larger diversity of crimes; its citizens have far fewer due process protections (they can be held effectively indefinitely prior to trial even after recent reforms, they have no right to refuse interrogation, etc); it forcibly sterilizes women in prison; it harvests the organs of prisoners.
We should indeed imprison fewer people and of course end the war on drugs (already, we're seeing sharp drops in the number of people incarcerated for simple possession of cannabis) and our for-profit prison administration is fraught.
But let's keep perspective. It is ultimately pointless to compare criminal justice between a country that has the rule of law (even when that law is unjust) and one that simply doesn't have that. A comparison between the US and China is, unfortunately for both countries, unhelpful.
We won't settle this here, although I'd like to offer lots of coutnerexamples. As I said earlier, it's not that I think China is so great as that I'm deeply disturbed by the flaws in the US criminal justice system. Maybe we should pick this up via email?
I don't want to go way off-topic with this, but it's a pet issue of mine because I think it's a human-rights disaster.