The one child policy only really mattered in the cities, rural China had different rules. There is also no incentive for China to lie, quite the opposite, underreporting their population would be a boon for their success on the global stage: imagine if they are achieving what they achieve, with half as many people?
Yes, except that China also uses its population as a military threat. It going down would take away some of the impact of that. So it always needs to go up, to reinforce it.
Many companies setup branches and sent IP to China in exchange for access to those billion consumers. Fewer consumers means a company might target India, etc. instead of China first.