It baffles me that Western countries don’t seem to apply the principle of reciprocity in matters like this.
If Western companies can’t realistically win a lawsuit against the Chinese government in China, why should Chinese companies be able to do the reverse?
because western countries operate on a principle of equality before the court regardless of who it is and this principle shall not be broken even if the those in court practice their laws differently. Creating another special system for addressing this would open a way for the abuse of justice thus it better to maintain the system as is.
In general, I don’t understand why you’d expect “reciprocity” in that sense to be a factor in the legal system.
If an American citizen murders a Chinese tourist in America, would you expect the American legal system to prosecute the murderer?
And should it be relevant if (hypothetically) China would not prosecute the murder of an American tourist by a Chinese citizen in China?
Consider the second order effects, there's a reason Western systems emphasise equality before the law. Of course most real-world implementations fall far short, but the system makes equality before the law a goal for a very good reason.
Consider the alternative option, we weaken equality before the law when dealing with non-Western entities who are bound by legal systems we consider on strategic grounds to produce inferior justice. Not only would this by definition be a weakening of our standards of justice, it creates an enormous moral hazard. Common law systems like the UK and US rely strongly on precedent, imagine the kind of unjust precedents which might be set if we do not apply equality before the law strictly. On top of that, having weakened standards of justice to frustrate foreign opponents, what is going to stop the political apparatus from weakening standards of justice again to frustrate domestic groups it doesn't like?
Even if it leads to disadvantage on the global stage, in my opinion the risks associated with weakening equality before the law far outweigh the benefits. A legal system with strong integrity is an asset, and it shouldn't be spent cheaply on short-term geopolitical gain.