Well I think the tributary system in MM is not bad, that's a system with which you can interact with your neighbours and the neighbours of your neighbours...that can be fun if it's well made.
For example, IRL the 1516 Portuguese embassy to China failed, one of the reasons was that the Portuguese attacked and conquered Malacca, a (at least nominal) tributary of the Celestial Empire. So maybe in game if you want to do something with China, you need to take care of the relations with its tributaries too...
And IMO faction system itself isn't lame, its problem is the mechanic seems to be not very well designed, the system simply forbids player to do certain things and the amount of events is relatively few for me, if there can be some event-chain-actived penalties and more flavor events, the idea of having another faction system may be not that bad...some EU3 mods made by Chinese players did make China less unfun so I guess we can say that's not impossible at all.
And in fact there're so many ways to limit the gigantic power of China while keep it from being unfun, the only questions are that how many efforts that will be spent and if that's really necessary, I mean, comparing with some other nations like Japan and the ones in Europe, China is not that popular...
Many ideas used by modders are good, like the collapsed China in "the Divergence"(a Vic2 mod), the collapse and re-union of China happens and may happen in any time and did happen during the time-frame of EU series, and even we focus on external interactions, there's so many interesting things to dig,aside from the Manchus, Mongols of the North was a really serious threat of the kingdom of middle, and the Japanese invasion of Korea, the Wokou Pirates, the "Hongmaos" (red haired people, the europeans) in Macao and Formosa...and here I just listed a
part of military "interactions"... well, and let me get back to the topic again, from many materials I think we can say that Ming IS strong but its smaller neighbours aren't that fragile neither, for example, check this out:
http://en.wikipedia.org/wiki/Fourth_Chinese_domination_of_Vietnam