I'm writing this somewhat quickly because I don't want to dwell on certain points since I don't have a lot of time to write this at the moment, but if you have follow up questions please let me know and I can come back in a few hours and devote more attention to the finer points of the issue.

So then. I work in Chinese linguistics rather than just history proper, and I tend not to go back earlier than the Song or, if pushed, the Tang. But I can address your question from the perspective of someone who's dealt with the pressures you bring up. Someone else will hopefully be able to get into the historiography a bit more deeply than I will here.

there is a booming amount of resources coming out from archaeological digs, especially census and legal writings,

Yep, and still plenty to be discovered. We probably won't see another Joseph Needham stumbling around, but there's still a huge amount even just in private collections that will hopefully some day be unearthed.

I was unsurprised that academic output from China and Taiwan eclipses that from the West by a considerable margin.

The reasons for this aren't necessarily what you think. While most of the good scholars of Chinese history (and linguistics) do read Chinese (and Classical Chinese), there are far far fewer of them than there are Chinese historians and Taiwanese historians who read these languages. Japan also has a long tradition of research on Chinese topics, and there are quite a few really interesting bits of history that (to my knowledge) have simply never been written about in any great detail in English, but has plenty in Japanese. I don't read much Japanese, but if ever there was another language to learn to help with studying Chinese history, that'd probably be the one to learn.

Still, one of the biggest bottlenecks is there are just far fewer non-Chinese or non-Taiwanese scholars with the language proficiency required.

just how much government control is there on academics to publish a "party-friendly" viewpoint on such distant period in Chinese history?

So this now gets more into the kinds of issues I usually need to keep in mind in my own research. I do a fair amount in academia in both China and Taiwan, as well as in the West. I'm in the process of submitting a paper in Mandarin to conferences in the PRC, and have done graduate programs in both China and Taiwan. My focus is linguistics, but that gets into a lot of other areas like anthropology, sociology, history, government policies (historic and current).

With this in mind the one thing I'd caution you about is not lumping China and Taiwan together regarding the political pressures. It's night and day, and I know a lot of Taiwanese scholars who publish in China but hate it because they often have to accommodate to a lot of unnecessary external pressures.

But, more often than not, it's really not about the Central Government telling you to do a party-friendly version. More often what the issue is is about internal politics within Academia in China. It's still very much sensitive to the feelings and egos of the older guys who've been around for a while. Even in linguistics, there are certain (really benign) things you just can't say and get away with if you want to still have a career in China, not because you'll get put in jail, but because you'll be shunned by others in Academia who aren't willing to go down with you, even if secretly they might agree. Certain figures who are the "experts" on certain (broad) topics do not get challenged.

It's not that you don't have to say X Y and Z because that's what makes the Central Government happy. You have to say X Y and Z because if you say A B and C instead, it's going to be a lot harder to ever get a good job.

I also want to make it clear that this applies to every aspect of your research. It doesn't. Early on you figure out the sensitive topics and who's not to be offended and you just stay away. Like most of these sorts of controls in China, it comes down to self censorship rather than active external pressure. But aside from those issues, you can still conduct good and productive research. Then in 10 years when those people have passed and their proteges don't have quite the same power, you can get back to some of the things you set aside. That's my own plan, anyway.

How much is coming out of China is academically worthy in comparison to those in English/ European journals?

At least in linguistics, it's bad. Stuff coming out of Taiwan is above and beyond what's coming out of China. There are two issues here, but they share a common reason. It all gets back to language proficiency.

The average Taiwanese scholar is quite proficient at English. They read the foreign literature. They know what the state of the field is like in the rest of the world. They keep up on the latest developments and read the latest arguments. Many of them got their own PhD's abroad. In China this is not the case. It's often times infuriating just how behind the times my subfield is in China. Stuff that has been tried, tested and ultimately rejected is only just now starting to be considered in China. People just don't read the foreign literature, and as a result, very few of them are able to properly analyse the data. I have shelves full of books published in China in the past 5-10 years and they're good (but not great) as a source of raw data, but I rarely see analysis, and when it's there, I rarely find it sufficient. I know I'm not the only one who feels that way about a lot of the scholarship coming out of there.

I said there are two issues here, and the other one is that things simply aren't coming out of China that much. What I mean is, just like many are not as comfortable with the literature being written in English as something to read, those same people aren't going to be writing in English either. There are exceptions, but it's a small minority. Fortunately there are at least some who are both excellent scholars and taking part in the field on a more global scale. It's just too bad there aren't more. It'll probably get there, but it's going to take a while.

That got long. Sorry.

tl;dr: Much of what you might suspect is true, but not for the reasons you suspect.