Is there a way to have Asian nations dominate in their own sphere to the exclusion of the Europeans? Like Europeans still trade in the East but don't establish colonies because there's either no room or the profitable locations have already been taken under the control of Chinese, Indians, Japanese, Oman etc?
Nope. Not without major changes to Confucian doctrine and impossible changes to Indian politics. More on that in a later post.
The
kleinstaaterei are weak, resource-rich, and they don't have the real protection of big overlords like China and Mughal India; they're just too far away and neither big power is naval-focused (India because geography means their only major enemies are always
in India, and China because Confucian bureaucracy is opposed to naval expansion and antithetical to the major motivation for naval expansion: mercantile trade).
Ideally, the local big powers reform to match the European model and only lag behind by 200-300 years. However, at the time they would just see no need for it; as far as they're concerned, foreign islands are changing hands but the spice still flows. They won't realize the military potential of these islands, they won't know about European future plans, and they won't find expansion along the European model economical at that time.
At best, the kleinstaaterei alone go to European hands directly, with the Europeans getting heavily involved with the politics of local continental powers like Burma or Vietnam.
Still, it would be nice to see Burma, Siam, Korea and China industrializing along the lines of Japan, hopefully with minimal ideological contamination from Western religions (Christianity, republicanism-democratism, Marxism, etc).