I think there might be more to it than that; certainly CX is a better airline than CA and MU, but from what I have heard KA is very good. In any case, the competition may be counter-productive; KA flies to quite a few Chinese destinations, is now a known name and can feed traffic efficiently to CX's routes, particularly to TPE.
Also, don't forget that the Chinese government will have a say in this.
I think (and hope) it's far more likely for both airlines to stick with what they're good at. That said, I do see KA expanding its reach.
As to CX's expansion plans, the 346 order effectively gives the plot away; that's only the trickle that will lead to a flood. There'll be quite a few more where that came from and in time, I could see them replacing the A340-300s (I'm talking end of decade here).
By then of course, the A380 will certainly be in the fleet.