The iPad debuted in China at around 4,000 yuan, and even after the price cut in March it still cost around 2,800 yuan. I found any number of recently released ereaders for between 1,000 and 1,500 yuan. When something costs twice as much I'm not sure it's in the same market.
It's more likely that the ereader market is down because of cheap tablets and PMPs (much like the US). All of these products fall in the same price range, so they do compete directly.
Even so, the news is still bad. Hanvon, China's largest, lost 40+ million yuan last quarter. That's down from a 41 million yuan profit same time last year.
via China Times