What if this is part of the development process for a larger and higher altitude unit in the future, and where the performance of this aircraft is still able to offer a capability which others on the export market do not?
Because I actually agree with you -- since CH-7 first emerged a half decade or so ago, I felt that it was a bit small, but in context of overall PRC MIC export efforts and how it intertwines with their own domestic development process it makes a fair bit of sense. The sheer number of somewhat suboptimized UAVs they have developed for export is rather mind boggling, and I don't see anything special about CH-7 in that context (it's just probably among the most "high end" of the "suboptimized UAV" categories and can meet a niche that others do not).