It's not that they couldn't if they wanted to; they could. But the history of domestic demand has been for cheap pens --the BICs/Papermates of the world. Their history of consumer products has been very utilitarian from pens to the mao jackets and the "iron furnace in every yard"[1] program to bootstrap industrialization onto a country where it arrived late. So, the opportunity arrived where they had plenty of availa…
There are lot of unbranded pens in the market that stop working even before the ink inside them are used up. On the other hand, Bic has better pens because they cannot afford to disappoint customers.
China faces a branding problem, but most markets are saturated and cannot accommodate another brand.