There were a significant amount of social factors present within Britain during the 18th century which eventually led to the Industrial Revolution, and many of them were generally not prevalent within China, regardless of the specific time period involved. The issues involved IOTL specifically focused on textiles, steam, and iron, although there were other ones, such as chemicals, and further technological developments occurred mostly due to the fact that the simultaneous main pressures involved forced policymakers and laborers to increase efficiency, so focusing on one factor at a time would have not provided the same outcome. Just focusing on steam does not address why or how it could be efficiently implemented on a widespread scale, specifically concerning ships, and would not thoroughly address other societal issues that need to be tackled in the long run.
I agree, along with the fact that this situation also explains comparative advantages, as the colonies were more suited to producing raw materials, while it was more profitable for Britain to manufacture products, so both regions began to specialize in a specific area concerning production. However, diminishing marginal returns also need to be considered, as further increases concerning inputs will eventually lead to smaller increases in outputs. As a result, although this might have led to significant developments when the policies were first implemented, they gradually leveled out after a while, so other changes would have eventually been necessary in order to counter demand over time.
. . . I simplified many of my initial assumptions, and some of them didn't portray an accurate picture of the situation as a whole because I attempted to limit the issues to the differences between Britain and China, so I might have significantly misrepresented some points. In addition, the analysis becomes extremely complicated when various models are taken into consideration, such as the one initially proposed by Adam Smith, along with other ones, such as Harrod-Domar, Lewis, Rostow, and Solow, although I will focus on Smith because his analysis is sufficient for this discussion.
To begin with, the main issues involved are labor, capital, and land.
Labor, or human capital, needs to be generally sustainable in the long run, so too much or too little would theoretically be undesirable. By the 18th century, England had enough workers to utilize, and had a surplus according to certain conditions, but this was dwarfed by the general situation within China, as the latter's overpopulation eventually began to lead to severe social problems over time, and partially explains why the dynasties were eventually overthrown, along with widespread revolts during the late Qing. In addition, China's social conditions meant that proportionately speaking, its populace was much less educated than the corresponding group in England, as the former had an extensive writing system which took much longer than other ones to memorize, not to mention that the government significantly underrepresented the population due to various factors. While England's literacy and education rates weren't exactly stellar either, not to mention that the middle class did not begin to emerge until the 19th century or so, its political structure greatly facilitated social transitions in the long run. These changes eventually lead to an increase in capital, as an increase in wages eventually translates into higher savings, and ultimately affects productivity, which is further influenced by an increase in demand, leading to technological innovations in order to compensate for these changes.
I could go into further detail, and also discuss the "Natural Resource Curse," which highlights the necessity of stable institutions, but I think these would probably be superfluous.
That was essentially the case, as merchants [in China] were generally viewed as a lower class than farmers, given the fact that the former technically did not produce anything on their own. Challenging this cultural mindset would be extremely difficult, if not impossible, given that this was set in stone in part due to Confucianism, and would require extensive cultural and social changes at least by 1000, if not significantly earlier. IIRC, China also set limits on how much tribute could be received because the amount denoted how much trade would be allowed, so if tributaries attempted to petition the Chinese government in order to gain more resources, the court feared that the sudden influx of foreign resources would flood the market, while comparatively valuable resources might end up in the hands of foreigners, which was undesirable in the long run. Economically speaking, although there would be a general equilibrium in the long run as supply and demand would dictate the flow of goods, it would be difficult to explain the concept to the Chinese government before 1800, given that the theory was developed through hindsight, instead of forecasting an uncertain hypothesis that needed to be tested through trial and error.
