Monero would have just as cheap transactions as it does now even if it had Bitcoins usage. It has dynamic blocks. Fee pressure would come back down as blocks adjusted to accommodate more use.

Bitcoin can't do that because it has a fixed blocksize. More adoption = higher average fees that grow and don't come back down. Lightning doesn't scale. To onboard the world to LN you would need something like 130 megabyte blocks. You should look into a real solution like MimbleWimble that actually scales (and offers pretty strong privacy). Litecoin already did all the R&D.

Yea, miners in China could do that because regulations were lax and its still relatively early. We already see them moving to clamp down on all crypto in the west. The eventual outcome is that regulations will just increase in every country until there is nowhere to run. Miners will just pick what they think is the lesser devil, but overall it will still be worse than it is now.

What will you do when they outlaw self-custody? Or ban it from being used in their markets? (or make the regulatory burden so great it handicaps the use there)

All that is left is black and gray market money. A place where Bitcoin is rapidly losing ground and wont catch up unless something changes soon.