"Another part of the order that worries Moussouris is the central Chinese vulnerability database that will be created to house all of these reported bugs: "
Just because we live in a connected world, doesn't mean China's network vulnerability database has to be on-line. It could be stashed on properly backed up USB sticks on computers never attached to a network. My guess is that the database will be tiny -- a few thousand items. It could probably have been handled nicely by a 1980s 8086 PC with 5.25 inch floppies.
In fact, it likely doesn't even have to be computerized. A physical file of 3x5 (OK, OK in China, possibly A7) index cards written in Chinese and kept in a safe in a secure facility could probably do the job -- whatever it is -- just fine.