Yes the core area of China needs to be decrease. But it's hard to add new civs in this area to debuff China, because in history China is a unified nation in most periods. Maybe Xiongnu or Jurchen?
In most periods? Let's look at that: The Zhou era had a unified
Northern China, while the entire area south of the Yangze river was not part of that empire. Sure, it's okay to place barbarian/independent cities in China for that era, right until the Qin dynasty comes along. That was the point where (northern) China started dominating the Yue, and slowly sinisized them. Still, that process took long. Very long. The Han dominated southern China as nominal vassals, but only the short-lived Jin dynastie re-unified China again, 280 AD. That union fell apart in less than a hundred years and we have the Southern and Northern Dynasties for another 200 years until 590. Then re-unification under the Sui and Tang for about 300 years; before China split apart again for less than 100 years. The Song re-unified China again, but they always had strong northern neighbors, the Western Xia and the Greater Jin Dynasty (Jurchen) who drove the Song to concentrate on their power base in southern China.
Mongols enter and leave the stage and THEN we can really argue that China was a unified nation afterwards (Ming, Qing eras). And even in our later times, a North-South split was often visible, what with the Southern Ming, the Taiping rebellion or the KMT/Taiwan issue.
Those movements are hardly comparable to each other - but then, the (Northern) Chinese dynasties are also swept into the same basket despite vast differences between them. I'm aware that we're talking a game here, so we need to simplify historical narratives and disregard detail snapshots. Otherwise we would have to take into account that four different Babylonian empires existed, and that classical Egypt went through 30 dynasties, half of them not fully Egyptian.
Long story short, I'm taking a stance for a (weaker, more economically driven) Southern China civ that
may exist independently of the Northern one, unless when Northern China has them vassalized or gobbled them up entirely. The area in China's south is certainly large enough to support that. Southern China would have a later starting point than Northern China, and they would get a smaller core area, mainly at the coast. They should rarely dominate the entire China, as that is the role of Northern China. But in eras where Northern China is weak, they should pick up momentum for a while.
They'd start as the Bai Yue tribes and Yue Kingdoms until roughly 200 AD, afterwards known as Southern China (with likely names of Southern Dynasties, Southern Song, Southern Ming, Kanton/Guangdong, Taiping, KMT/Nationalist China).
I'm not entirely sure how playable they would be. They'd more exist as the NPCiv antagonist to China, like the Celts are the antagonist to Rome in Europe.
Either Wu or Yue State is a part of Zhou Dynasty and nominally they obey the domination of the King of Zhou. So they are not able to be an independent civ.
What, vassals are not able to be an independent civ? Even the State of Chu (like Wu and Yue) was not a happy vassal to the Zhou Kings and constantly threatened the northern state alliances - not to forget that the Zhou King had no influence later on.
And Wu/Yue from the late Zhou era (not to be confused with the Bai Yue that I suggest above) were also just 'nominally obeying', like you said. In fact, they were hegemons in their own right, while the Jin state and its alliance of the Northern Chinese Plains crumbled in the Warring States period.
