Bad strategy to blame.
CISCO had the wrong strategy for China. What they should have done was one of two choices:
1) Sold their kit in China at a giveaway price that even the locals couldn't copy it for, weather the loss by using some of the massive margins they have charged the rest of the World for years, and when all the Chinese competitors have died simply ramp the prices in China back up slowly.
2) Paid bribes to the right Chinese government ministers, given them franchise rights and employed their idiot children as "consultants".