This income should be treated as self-employment income as there is no social security or medicare taxes being withheld or paid on it as you have suggested reporting it.
Wages or salary would be subject to withholding or self-employment income would be subject to self-employment tax on the net income for the year.
Using the substitute W2 approach does not address collection of the employee or the employer share of social security or medicare tax liability on your earnings.
Typically earnings paid for services performed in the United States would not be subject to income taxes being paid to China.
