A) state capitalism isn't a thing. The vast majority of industries are just socialist. They exist without profit motive exclusively for the benefit of the Chinese people. The private sector industries interact with the outside world and make up less than 40% of GDP. It's why 'chinas house market collapsing' has made exactly zero people homeless and has caused exactly zero people to not have a job. The private luxury housing market collapsed, which makes up a tiny fraction of all housing, and mostly just exists for foreign investors.

B) China allows nonessential capitalist markets because capitalism is a required stepping stone of development in industry, and it makes imperialist powers like the US and eu far less invadey if they can make money off you.

C) it'd be great if China's goal was degrowth but that's not really fair, and that's simply not their goal. Their goal is a good life for every citizen, utilizing capitalism to build industries that later become nationalized, unionized, and by extension less wasteful.

The ussr proved you can't skip the wasteful capitalism stage of development, even if you provide an okay life you'll eventually get some asshole that sees America's array of twenty billion brands of cereal with the same ingredients and use that as some flimsy way of saying socialism sucks. That's why dengism has worked better than the ussrs approach, and why China's current approach is beating out every other country on growth, increase in quality of life, increase in education rates, while reducing the number of billionaires in society.