In the last few years games such as Kane and Lynch 2: Dog Days and Army of Two: 40th Day have set themselves in China, in this case Shanghai (Disclosure: I've yet to play either of these games). Modern Shanghai with it's high rises and alleyways makes it a great location for an urban shooter, and most recently Sleeping Dogs proved that the cityscape of Hong Kong proved to be a great location for an action game. However most importantly Sleeping Dogs' success proves that a modern China (here, Hong Kong) can be a great setting for an open world action adventure.
In my opinion a game set in a modern China would help the players understand a little more about the Chinese. I don't mean understand China, it'll take years and years and loads of courses from Jonathan Spence to even begin to scratch the surface of what is China, but a game set in modern China can really give players a look into what life is like in Middle Kingdom and help lead to modern world set games that could one day take place in Beijing or Chongqing.
Sleeping Dogs made the point of incorporating and pointing out how important face is in Asian culture, particularly Chinese culture, it also set the tone of China—that guns aren't common. A game based in modern China should take what Sleeping Dogs has established and run with it. The game could be hyper violent without guns and have interesting plot elements where the player finds a gun.
Cities like Macau, Taipei, and Hong Kong, are also sprawling metropolises. The dense construction and population can make for a great setting. Taipei in neighboring Taiwan, for instance, has night markets and temples galore littered across the city. Macau has casinos built right into the urban city. The cityscapes of these places make great locations to race in (Macau was featured in Project Gotham Racing), and they also make great locations for free running. Imagine running from rooftop to rooftop in the housing projects of Shanghai.
On top of that, using the settings of modern Hong Kong, Macau and Taipei, we can easily move into China proper. The Triads, while based outside of the Chinese mainland, operate in China. Storylines can include elements such as human and drug trafficking between the Chinese mainland and the autonomous regions.
Our own Evan Narcisse pointed out five movies that made a case for Hong Kong as a setting for a police drama, and I couldn't agree more. It is in my opinion that there are loads of stories which game developers can draw inspiration from coming out China, particularly from Hong Kong and Taiwanese crime stories. Evan left out a few good ones, but stories like Election 1&2 take place both in Hong Kong and the Chinese mainland. A Better Tomorrow takes place in Hong Kong and Taiwan. These are all stories that can be translated for a western audience and can be used to inspire great games.
Sure, many of the games I envision set in modern China can be called Grand Theft Auto clones, heck even clones of Sleeping Dogs but the stories and settings that locations such as Taipei, Hong Kong, Macau, Shanghai, Shenzhen, and even Beijing can be as rich and rewarding as any Liberty City.