I would like to turn the issue upside down.
I am aware the main question might be on the capability of the fleet... But others have already answered in this regards. I would like to add more on the issue of the overall socio-political framework for colonialist expansion at sea... As you seem to be interested in motivations and desire for conquest. Also, you mention the Armada was scrapped for political reasons. Well, what follows is an alternate scenario in which China not only keeps fleets like these but does also carry out research in the field of military tech.
According to some historians, the reasons for European colonialism have to be found in
Competition between states
Fail-safe scenarios for the nobility, which does not risk the throne in waging border wars
Subsequent spike in military spending
Subsequent spike in warfare among European countries
The offshoot of this is:
A. More spending on military research
B. Betterment of the taxation system in order to improve tax revenue
C. Incentives to private industry and commerce
D. Competition between the nobles as per who spends more money in science etc.
So, if you factor these in, the issue is not much whether the fleet itself was suitable, but whether entire countries had the desire to colonise the world.
Even the technological edge is something that became more apparent later on. Europe took over most of the world before the industrial age. Late Renaissance technologies were sparse, but strategical.
This is the way I see a colonialist China:
Not one China, but MANY Chinas. Competition sparks the search for resources. If China challenges Europe, you should conceive of it as being divided into 4 or 5 major States and not as a single entity. Hence, what you are looking for is an East Asian invasion rather than a China-only expansion.
It is paramount China has better technologies... So you need to have them improve their vessels, navigation system, and the like. Same goes for military advancements. China spent a lot of revenue on horse archers because of the obvious threat from the North (after all, Northern Asian populations had already conquered the world... But on horse!). You need now to ease down the pressure coming from the steppes, in order to give your countries some room to develop as maritime powers.
Also, although the above points are meant to trigger Chinese States into increasing their military spending, you also need to make China a little poorer than Europe. Leaders in China need to be bad leaders, not good leaders who care for the people or look for balance. Literally reverse the relation: it is not Europeans who come back to Italy with tales about the fabled riches of China... Now it is the Chinese who need to be fascinated with Europe. We have examples of visitors and diplomats (Rabban Sauma anyone?), but their relevance and popularity in China was not nearly as big as that of European merchants in Europe.
Make sure China has increased its tax revenue (counterintuitive for a country based on bureaucracy, but fact is the ratio of tax revenue was actually lower than that of Europe... Even at the peak of the Chinese empire).
Give some of your Chinese States access to financial tools. They had paper currency already... Why not boosting their financial capabilities even more? They will eventually lead to better abilities to invest.
Private investments will lead to the creation of Companies. Yes: not your ordinary East India Company, but the Chinese equivalent of it will do the trick. Think of your Chinese nationals as colonialist qua members of private enterprises, as strong as the countries that host them. Have them start with trad e posts and then increase the entire thing with some good old gunboat diplomacy.
To spice things up, have your Chinese colonialist states struggle between each other to settle disputes on some shared religious framework. Division shall be enough to have them quarrel continuously, but the religion shall also be homogeneous enough to make them look like a single entity from without. Also, such religion should focus a lot on proselitism and rewards in the afterlife... So to motivate people to travel and die.
Finally, you need your Chinese dudes to be already set up for good in India.