Short explanation as Im typing on cell phone.

Im not an expert in this field, I'm just MA student, but I can tell you one of the best answers for your questions can be found in works of J. Needham.

From what I've read in his works. Chinese literati/gentry/nobles realised at some point that development of gunpowder can lead to major changes in hierarchy of Chinese society. They were afraid that rebellions could be more bloody and cause more damages or even change dynasty or way of ruling or even new warring states period. They were quite right but their stubborn opposition towards changes, and adaptation to new things, prevailed in most of their actions thus resulting in isolation and lagging behind West. It is also good to think what didn't Chinese experience but what possibly was direct or indirect result of gunpowder in Europe.

More demanding rivalry between states - constant need for new techniques and weapons.

More visible social mobility. Remodeling society, and its structure.

Colonisation - simply put advantage in firepower.

Many wars had impact on creating concept of nation and their emancipation.

As a result of these above - more efficient institutions, rule of law etc etc

These re simply put some of things Europe experienced stronger than China

Though gunpowder and first handcanons were introduced by Chinese they didn't reall use them well and with big accuracy.
When Newtonian physics were applied by British, cannons became really accurate, and Chinese had to learn how to use own weapons again after 600years..