This mental logic is what stopped business from expanding, along with the idea of the Chinese being above the rest of the world, so no need to learn from the rest of the world or to trade with them
Yes, that is part of it, but not perhaps the most important part.
The structure of traditional Chinese society is weird, not like anything else in the world except for Japan, which was heavily influenced by China, of course.
In almost all societies the soldier is the most prestigious role, then merchants, then peasants. To over-simplify a great dea.
In China the highest position was scholar/official, a role that didn't really exist anywhere else, followed by peasant, then soldier, who was at the bottom. In Japan, the warrior was on top, and the scholar/official was absent.
Obviously in reality the soldier in China often had immense power, but the role as such was almost without prestige.
The merchant, however, was more or less outside and below the officially recognized social ranking. The businessman in China, despite often being wealthy, held a social position not terribly dissimilar from the untouchables in India, IOW no recognized position at all.
In effect, business in China was almost by definition organized crime. The businessman had no recognized right to his property, which was viewed as almost having been obtained by crime, and therefore could be legally and morally looted by the scholar/officials or the Emperor whenever convenient.
Therefore, for fairly obvious reasons, there tended to be a great deal of overlap in China between crime and business. Hence the tongs and triads, and to some extent the recent notable lack of ethics in Chinese business dealings.