I would HIGHLY suggest you seek professional help in your local jurisdiction immediately, if not sooner. There's quite a lot that you're not aware of, and even more than I am not aware of. But for what I do know, you need to start by reading two documents. One is at https://www.foundation.sdsu.edu/payroll_tax_labor_faqs.html and will *maybe* help you with determining if you have to issue a W-2, (or 1099-MISC in your case) or a 1042-S. I am not aware of how the tax treaty between China and the U.S. will affect you here. So I can't stress the importance of this.
Also, if the Chinese national will be departing the country this year, they can't leave until they have clearance from the IRS. If that clearance is held up because of "YOU", then "YOU" may have legal issues that could potentially go beyond the IRS. For this, read the page at https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens Pay particular attention to the section for "Departing Aliens"
THen to add to the potential frustration, if your state taxes personal income, that could be another issue in and of itself for all I know.
In conclusion, I know very little (if anything) about the application of tax law to foreign nationals. I know just enough to realize that I can't provide you any definitive answers, and enough to know that if you don't get educated or seek professional help, your could find yourself in a never-ending nightmare with the IRS, and also potentially with other legal issues having nothing to do with the IRS. So professional help is highly recommended here.
