Ok, I looked a little deeper into this story and the pivoting moment was WTTC in Dortmund, where in singles won Waldner, silver Persson and Grubba and Yu Shentong with bronze. In the team event Chinese lost to Swedes 0-5 and it looks like that was the last straw. The old CNT was dissolved and they dug up all the inverted they had.
I think I should add how and why Chinese lost for the completeness, after all it was my main question in this thread. This touches on tactics and the limits of the game at that age.
CNT played pips basically on the table, whereas Europeans played topspins much farther away from the table hitting the descending ball. The advantage of the CNT players here is obvious: they attacked long flying balls with spin-insensitive pips and were happy doing that.
The Swedes began to loop the ball in its apex point, much closer to the table. Closer to the table, loaded ball—now pips become passive against the topspin attack, because what do you do? Block? With the traditional chinese penhold? Not exactly a winning strategy on the top level.
What did Chinese reply? They copied this approach and enhanced it with the BH counter loop off the bounce using wrist, bringing the game even closer to the table and destroying, say, Waldner who didn't have even remotely comparable BH. This was first implemented by Kong Linghui and further improved by Wang Hao and ZJK. The natural extension of this idea was chiquita and all the modern TT.
Somewhat paradoxically we got modern backhand game from the chinese losing with pips on the FH.
Now, Kong Linghui is genius and all that, but my personal opinion is that we seriously underestimate the sheer thought power behind the CNT's coach headquarters. CNT's dominance doesn't come from the numbers, it comes from extremely efficient strategizing. Think about that: they only lost a couple of tournaments by the 1991 and managed to assess the weak points of their game, implement a completely new approach, change the whole system and come up with KLH in the timespan of some five years. Take into account that it was in the world very different from ours in terms of communication. Hats off.