This system essentially doubly empowers China as a polluter giving them both a free pass relative to industrial nations and a source of income for building out new infrastructure. Though I have only anecdotal evidence on which to base this assumption, I firmly believe that stories about Chinese wind farms and clean energy projects are the environmental equivalent of Trerezín (the Third Reich's so-called "model concentration camp" used to fool the Red Cross).
Encouraging this "gold-rush" atmosphere in carbon trading is Kyoto's limited time horizon. By drafting a treaty with such a near-term expiration date (Since when is climate change a short-term problem?) the international community has discouraged the building of large clean energy projects that require massive capital layout and have a long lifespan. From a certain standpoint the treaty actually incentivizes the construction of dirty industry. The feedback loop of revenue generated when the Chinese government taxes income on carbon credits produced cleaning up Chinese infrastructure actually incentivizes the construction of old-style dirty infrastructure. If the goal of the Chinese government is to industrialize rapidly (a safe bet, I think), then building infrastructure which will produce the additional boon of carbon credit income just slathers gravy on the meat and potatoes of industrialization. Again, were it not for the short-sighted time frame of Kyoto investors would be incentivized to build out large-scale projects which would generate these credits ad infinitum, especially if the promise of continued benefits beyond potential adherence to Kyoto by China were laid out. Instead, Kyoto merely creates an attitude of "get while the gettin's good." That hardly seems productive.