I've also heard of journalists and PIs using vehicles that look like undercover/unmarked police cars to get access to areas that might otherwise be off-limits to civilians - they sometimes get waved through perimeters or won't be ticketed/towed if they park in restricted areas.
Could this be someone showing support for Chinese police with over-the-top decals? Or was the driver actively pretending to be a Chinese police officer or is a police officer claiming some right to operate outside of China? The article didn't make the circumstances clear, other than the car obviously has the markings and seals.
ETA: Just remembered another odd situation/use case for fake police cars - as art or performance props. The UK band/art collective I used to work for, The KLF, featured a 1968 Ford Galaxy police cruiser in many of their videos, with the lights and paint intact but modifications to the seal and motto (using "To Serve and Protect" and the band's Pyramid Blaster logo). You can see a picture of it on the back of some of their 45s (see https://en.wikipedia.org/wiki/Doctorin%27_the_Tardis) and I know they drove it around London for the 3 A.M. Eternal video.
And in the Boston area there are owners of old Ford LTDs with Boston Police logos from the 1980s and 1990s which are used as movie props (see https://www.universalhub.com/2018/old-boston-police-cruisers...).