I can give you a overview of why Chinese intellectual works didn't penetrate Western consciousness up until 1900, so hopefully someone else can give you the rest of the puzzle.

Obviously, distance was the initial division between the literary worlds. Though trade contacts had been established across Central Asia and the Indian Ocean between China and the Mediterranean world since classical times, little literary penetration occurred, as the series of exchanges that characterised trade across the Silk Road meant that while goods and more slowly ideas and technologies made their way across the routes, literature did not. Even individuals that made their way to the Far East did not bring back literature, but their own fantastic tales of a mythical East, rich in wealth and utterly alien in nature. Marco Polo case in point.

The first real engagement of a Western audience to Chinese literature comes with the arrival of Jesuits in the 16th C. These Jesuits, such as Francis Xavier and Matteo Rici came with the intention of converting the Chinese to Christianity by winning over of the ruling groups of China, specifically the Imperial Court. To this end, the Jesuits studied Chinese literature and language intensively, translating both Classical Greek and Roman texts into Chinese, translating Chinese texts such as the Annals back into Latin for other Jesuits and creating the first known Latin anthologies for Chinese characters. Armed with this, European mathematical and astrological knowledge as well as attempting to present themselves as existing within a Chinese paradigm (for example they first dressed as Buddhist monks and later as Confucian scholar-officials, allowed converts to continue with practises such as ancestor worship and they attempted to philosophically cast Christianity as a natural evolution to Confucian thought) they managed to win some favour with the Imperial Court for some time. The Jesuits would eventually be dissolved by Papal order and Christianity and missionaries cracked down on by the Kangxi Emperor, a handful of priests would remain in China.

Though this knowledge would be filtered back to Europe, Chinese literature would remain a subject of study for intellectuals and scholars, particularly in an age with widespread illiteracy among the general populace. There was a period in the 18th C., particularly in France and England, where anything Chinese or "Oriental" became quite fashionable, though the references and images I've seen of this period seem to suggest a rather superficial engagement with Chinese culture, with such things a burst of garden pagoda building and the wearing of Chinese style silks. Perhaps someone else more familiar with the era might be able to comment.

Aside from the Jesuits, European contact in China would be quite limited during this period, as foreigners were restricted from entering the country save for an allocated season for trading in Canton as well as the Portuguese in Macau. In these matters, business was the primary concern, with European merchants being only allowed to deal with an Imperial mandated merchant group known as the Cohong, as well as only residing in a restricted area, meaning that little intellectual contact could happen.

After the opening of the treaty ports in the 19th century, contact between European and Chinese is now much easier as Europeans settled in concession areas and took on local servants. However, by this point, intellectual understanding in Europe has shifted, and ultimately coloured by understandings of European superiority. Chinese literature, as the Chinese themselves, are cast in the light of the native, inferior, colonial other. Chinese literature become aspects of intellectual research, that of colonial ethnographers but not a part of the common literature. From a European perspective, the Chinese have much to learn from the West, but the study of the Chinese is only worthy as an intellectual curiosity or as broader study of ethnology and stages of human civilisation.