True, but do to brain drain the Chinese can't be so tyrannical as to keep those overseas graduates away. The intelligentsia naturally leave those regimes that have a firm grip on their populace, and its happening now in China. While yes China is an oligarchy, it won't completely close itself off to the outside world. It can't because it cannot sustain itself do to it's large population and limited resources. Not so long ago China started a crackdown on visa over stayers and most of those who were sent back home were Africans. In retaliation African governments started to do that with Chinese people living in their countries. There are 40 million Chinese born people living overseas and less than one million foreigners in China. Even if foreign countries sent back 10 Chinese people for every foreigner, China would run out of foreigners before the rest of the world would run out of Chinese.

Also, Chinese overseas graduates would not be so keen on being English teachers at a private or public school. Many won't risk losing face to travel so far and come back to become a teacher other than a prestigious university. The money is not so high working in education. I do believe that there is, and will be a niche for foreign teachers in China. The elite 1% will continue to work as you stated because the Chinese cannot produce as many talented individuals do to their education system. I do fear that the ranks between the elite 1% of non-teachers and the teachers will thin out because China will have produced enough educated people to fill those spots.
As for teachers, you also have to factor in that the Chinese government has loosened the one-child policy a bit and now if a couple consists of one member that is an only child they can have two now. I belived that their will be a mini baby-boom in China that will give me some work here for a few years more.

Unless Chinese overseas trained English teachers lost their accent, Chinese English would only be recognizable between themselves and not the rest of the world. But that is a minor reason why I thing teachers will continue to remain here and grow in numbers.