You seemed to have mixed up the issue. If any foreigner wants to extend his/her Employment Visa, he/she has to approach THAT country's Visa Processing entity. In this case, the Chinese employee has to get it done from the Ministry of External Affairs of India—NOT the Chinese Consulate in Mumbai.
@ Sushama—The first-time Employment Visa Stamping has to be done at the Indian Embassy/Consulate in the country of origin of the foreign national—in this case, the nearest Indian Embassy/Consulate in China (nearest to his address as per his Chinese passport). The company has to apply for his Employment Visa, and once the approval comes (which usually takes 3-4 months), he WILL HAVE TO RETURN to China to get the first-time Employment Visa Stamping. Later on, he can get the extensions even while he continues to work in India.
What Dixon mentioned is right regarding 'He cannot work in India on a Business Visa.' Strictly speaking, this is illegal in any country—so better be careful, especially if you happen to have any union. Infosys ended up spending millions in the USA for adopting these practices—finally, they settled out of court.
PFA the FAQs on this issue—hope they would guide you to the next step better.
Regards,
TS