Firstly, China engaged in much more trade than you're suggesting. The silk road, running from central China through Central Asia and the Middle East to Europe was the longest trade route throughout much of human history - there was plenty of technological exchange, such as the spread of gunpowder to Europe. China was much less isolated than is often believed, and has never cut off trade with the outside world like Japan did.

Now, why did so many important inventions occur in China? Likely for the sole reason that it was a large area with a sufficiently developed economy to support artisans and inventors. One significant factor here was likely the lack of feudalism - Chinese peasants were not serfs, and could buy and sell land as early as the 10th century AD. This allowed those with the means to do so to specialise in particular crafts - consequently, China may well have had a proportionally larger pool of "skilled labour" in the medieval period.