Actually, Qing government paid great effort on maintaining a self-sustaining economic structure. To think of why China could not establish a production method as Western Europe. What we should bear in mind is the social economic structure and background are quite different in Europe and China. The method that adopted by Europeans was capital concentration while Chinese chose labor force concentration. The appearance of such ways might not highly related to government's choice. Based on different problems and needs, society and market choose the most fit way for themselves. Europe's choice led them succeeded to transform into industrial society while China's way led them reached the limit of an agricultural society. Both Europe and China managed to raise it's ability on self-sustaining, however, Europe's way allow them to reach higher than just self-sustaining.

If we have to find out what specific Qing practices are responsible for this? I would say ruler's biased impression on oversea trading was a huge obstacle. First of all, doing business and commercial activities was a bad thing under Chinese tradition moral values. Chinese culture itself acted as a hindrance force to businessmen and capitalists. Secondly, rulers and scholar officials held suspicious attitude towards foreign traders. In their mind, White foreigners were considered as barbarians and seed of rebellion. Qing government adopted a series of policies to prevent interactions between Chinese and Westerners. Regulations created inconvenience in commercial activities and idea spreading. Some Chinese intellectuals, like Wei Yuan, realized that they should learn something from the Westerners to improve themselves. Unfortunately, only when China faces disastrous military failure to the West, the innovative ideas will be concerned.

If we look into Modern Chinese History, China was undoubtedly weaker than European powers and Japan. But China was not completely fragile when she countered them. In the 1870s and 1880s, China put up a good fight against Russia, France and Japan. These are the results of Qing's modernization.

It's true that Japan did better than China in terms of modernization. To consider why China could not modernize herself as good as Japan. We have to do a comparison on the assistance and resistance force. If the former one possesses more power than latter, the progression of reformation will be faster. Otherwise, the difficulty of reformation will be greater. In China, traditional scholar official was a huge obstacle. Under strong objection from officials and peasants, reformation party had no choice but to change China bit by bit. The construction of Kaiping Colliery Tramway is a typical example. In 1876, Li Hongzhang, who was an iconic leader of reformation party, suggested building a railway to maintain coal supplies. When the tramway had done, the central government banned Li from using steam locomotive due to superstitious reasons. At last, Qing government decided using carriage as a substitute choice to run the tramway. Such ridiculous story proved that China had enormous cultural burden.

Another important factor was modernization posed a threat to scholar official. In imperial China, there was only one way to reach to power. Studying Chinese traditions and participated in imperial examinations. Over a thousand year, Confucian classics was the only instruction to solve political, economic and social problems. Acknowledging defects that cannot be answered by Confucian classics were not accepted by scholar officials. Confucian classics were the key of obtaining power, fame, social status and wealth. So modernization or westernization gave a chance to people to challenge and damage their vested interest. That's why officials and "future officials" objected reformation. At this moment, a dilemma appeared in the mind of Manchu monarchy. Should he steps forward on the road to modernization or slow down his pace to maintain stability? The ruler chose the latter and then received an ultimate defeat from Japan. After the humiliation, Emperor Guangxu attempted to reform in a more rapid and integrated scheme. However, Empress Dowager Cixi pulled off a coup which marked the end of "Hundred Days Reform".

Compare to China, Japan was luckier than China and all Asian great powers in the old days. Boshin war gave a chance to the reformist faction to clear up opposition factions once and for all. A strong government with an open-minded society is what we need for a successful reformation. When we understand the difference in China and Japan's situation, the answer would be clearer.

I hope this answer could be helpful

Sources:

王樹槐: "外人與戊戌變法"，上海書店出版社，1998年1月

金觀濤、劉青峰；"開放中的變遷"，法律出版社，2011年

石泉: "甲午戰爭前後之晚清政局"，三聯書店，1997年